Who gets breaks in Sandoval’s tax plan? Gaming, mining and others

By Kyle Roerink

Tuesday, March 24, 2015 | 2 a.m.

Buried in the 130-page tax bill that Gov. Brian Sandoval pitched to lawmakers last week, there's a safe haven for mining, gaming, insurance and bankers.

The tax, known as the business license fee, is a broad-based framework that would levy new dollars from the state’s 330,000 businesses based on percentages of their gross revenues every fiscal quarter. Section 20, which outlines a series of deductions and exemptions, is what all special interests are looking at in the bill. It cuts new loopholes into law and protects some industries from double taxation. An array of the state’s industries are eligible: mining companies, aircraft manufacturers, gaming operations, insurance companies, hospitals, retailers and others.

Critics of the bill say the deductions and exemptions could lead to a slippery slope of largesse as Sandoval and other lawmakers in support of the tax try to push the bill through the Legislature. In other words: If one industry gets a break, others will come with their hands out.

The legislation has been compared to the 2014 ballot initiative known as the margin tax, which was turned down by 80 percent of voters and loathed by the same industries who are now getting a break. Some in the Legislature say Section 20 was the way to make Sandoval’s proposal appetizing. The margin tax would have raised at least $1 billion — more than double Sandoval’s bill — and lacked the breaks outlined for mining, insurance and gaming.

Jeremy Aguero, the state-hired economist who crafted the new legislation, conducted multiple studies for pro-business groups that campaigned against the margin tax last year.

The margin tax was economically “unsound” because the deductions, exemptions and other considerations were left out, he told the Legislature Wednesday. As a result, Aguero said, the businesses who were denied those deductions and exemptions would have faced an unfair tax burden.

Corporate tax breaks are a common subject of scorn in government and fuel for the ongoing debate about how wealthy corporations and individuals should be taxed.

In Nevada, officials, politicians and business leaders often tout the state’s laissez faire tax structure as a magnet for businesses. There’s no levy on corporate income and only a small license fee — $200 — to register as a business.

The bill’s authors contend the deductions and exemptions in Sandoval’s bill aren’t cut-and-dried handouts for the state’s favorite industries, but rather are ways to fairly apply a new fee on businesses already subject to taxes.

Section 20 is weighted with a swath of legalese on banking, insurance, gaming and mining. It links to statutes and the constitution like a game of connect the dots.

Many of the businesses mentioned in the section currently pay industry-specific taxes that allot hefty contributions to the state’s operating revenue in the general fund.

Based on recent taxes, more than $600 million from gaming would be deducted if the law holds. More than $670 million from insurance premiums will be deducted. Mining — depending on market rates — has provided annual revenues totaling more than $100 million. Last year, it fed the general fund $31 million.

Sandoval’s bill is designed to raise $438 million to bolster the state’s low graduation rates, expand charter schools and provide new programs for gifted, disadvantaged, bilingual and low-performing students. Special interests across the board are willing to pay more to achieve Sandoval’s goal. But some groups are at odds about how businesses should pay and are throwing support behind other tax proposals.

Trucking, retail, registered agents and others are looking for alternatives. Lawmakers from both parties and chambers in the Legislature have introduced bills, and more are forthcoming.

Paul Enos, a lobbyist for the Nevada Trucking Association, said there was a “scrum” among special interests jockeying for lower rates in Sandoval’s plan.

“Anytime you have a tax and start making exemptions, that means the rate for somebody is going to have to go higher,” he said. “The bill we are looking at today is as simple as it is ever going to be.”