Nevada lawmakers will start talking about taxes as soon as Legislature meets

Democratic leaders of the Nevada Legislature will launch a broad review of the state's tax structure during the first week of the biennial session that starts Feb. 4, Senate Majority Leader Mo Denis said Tuesday.

Lawmakers will consider everything from a new business tax or services tax to lifting a 5 percent constitutional cap on taxing the mining industry, which has thrived during the recession.

Neither Denis nor Assembly Speaker Marilyn Kirkpatrick said Democrats will definitely push to raise taxes in the face of certain GOP opposition from lawmakers and Gov. Brian Sandoval. But both said every source of current and potential revenue will be examined to help Nevada pay for education, health and other programs.

"From Day Two we have to start having those discussions," Denis said in an interview, noting the first day of the Legislature is full of introductions and ceremony. "If we really need to find solutions for Nevada, we have to put everything on the table. We're not necessarily looking to increase revenue. I want to listen first."

In an interview last week, Kirkpatrick hinted at but would not say conclusively that the Democrat-controlled Legislature will support tax increases while determining the best way to fund the state budget.

She said that during the first week of the session, legislators will start redefining what items are taxed. They also will look at fairer ways to distribute taxes to local governments, she said.

As an example of uneven revenue collections, Kirkpatrick said the live entertainment tax is collected now on some music bars, but not on other big events such as the Electric Daisy Carnival.

"I guess you might consider this a tax increase, but are we really collecting a tax we should have been collecting all along?" she asked.

Kirkpatrick also said the Legislature may consider an alternative to the 2 percentage point business margins tax that the Nevada State Education Association wants to put before the Legislature in February. If the union's initiative, which faces a state Supreme Court hearing today, overcomes a lower court's rejection, lawmakers might have to consider adopting this tax in the first 40 days of the session.

Kirkpatrick chaired a tax committee last session that reviewed a business margins taxes without ever bringing  a bill up for a vote.

The 149,000 people who petitioned to put the business tax on the ballot for approval by voters "have spoken," she said, adding that lawmakers should take charge of the issue. "We need to take it seriously. At the end of the day it is the Legislature's job, and we should man up and do what we are elected to do."

The state teachers union estimated its proposed tax would bring in $800 million a year for education.

The plan to discuss specific taxes early comes in contrast to the 2011 session when past Democratic leaders waited until May to pitch a dead-on-arrival $1.5 billion plan that included new business and services taxes.

Sandoval and leaders of the Democrat-led Legislature agreed to a $6.2 billion general fund budget balanced with about $620 million in taxes that had been scheduled to expire after two years.

Ahead of the 2013 session, Sandoval said he will propose extending for another two years those same $620 million in sales and business taxes that otherwise would expire next July 1. Leaders of both parties in the upcoming session have suggested they support the extension, all but assuring passage.

"I think we don't have much of a choice," Denis said Tuesday.

State budgets have been tight since the recession began four years ago.

Last week, the Economic Forum estimated state revenues - mostly from gaming and sales tax collection - will be about $5.8 billion for the next two-year budget period, or $343 million less than current spending. Extending the $620 million in taxes will make up that gap, with extra revenue available .

The forum is a group of five business leaders who by law determine how much tax revenue state government will have to spend during the two-year period that starts in July. The forum meets again on May 1 to provide final estimates used by lawmakers to set the budget.

Sandoval is scheduled to submit his budget to the Legislature on Jan. 16.

Carole Vilardo, the president of the Nevada Taxpayers Association, praised the new Democratic leaders for planning to review taxes early instead of waiting until late in the session to jam a revenue plan through.

"Starting any tax conversation early-on is definitely a right move," Vilardo said. "When you do something at the 11th hour, there is no way you can identify half of the unintended consequences."

Vilardo said tax battles have been a prime feature of legislative sessions in the past decade, especially since the late Gov. Kenny Guinn proposed a gross receipts tax on businesses in 2003 to broaden the Nevada tax base. It failed, but Guinn signed a record $1 billion tax increase that included higher payroll taxes after a major court battle.

Vilardo said she couldn't predict what might happen during the upcoming session, although she expects Nevada's tax base to be broadened to lessen reliance on gaming, tourism and sales taxes.

More than half of Nevada's economy is service-based, said Vilardo, including everything from hair salons and plumbing repairs to landscaping and prostitution. During the past session, officials estimated a 1 percent tax on services could raise about $600 million over two years, with exceptions for things such as health care.

Contact Ed Vogel at evogel@reviewjournal.com or 775 687-3900. Contact Laura Myers at lmyers@reviewjournal.com or 702-387-2919. Follow @lmyerslvrj on Twitter.