By Victor Joecks
The tax hikes passed during the 2015 Nevada Legislative Session ended up around $160 million larger than Gov. Brian Sandoval originally said, topping $1.48 billion.
That figure comes from a recent summary of the tax increases given to lawmakers in a 300+ page handout from the August Interim Finance Committee meeting. Tax tables were prepared by the Legislative Counsel Bureau.
Sandoval originally called for a $1.3 billion tax hike (which some in the media are still calling a $1.1 billion tax increase).
After Economic Forum members accounted for transferable tax credit programs, which are indirect subsidies, in their binding May 1 revenue projections, Sandoval and Sen. Majority Leader Michael Roberson proposed a further increase in the cigarette tax. During the session, lawmakers also pushed through a hefty gross-receipts tax on taxi and transportation-network companies.
With those additional increases, the tax hike reached almost $1.5 billion, which matches some projections of what the 2014 margin tax would have generated. Voters defeated that margin tax by a 4-to-1 ratio.
Here is a full list of the tax increases for the General Fund and Distributive School Account and the amounts extracted from the private sector.
The budget also contained two tax transfers: $95.5 million from the Highway Fund to the General Fund and $313.9 million generated from 2009’s Initiative Petition 1 Room Tax to the Distributive School Account.
There are a few things worth noting.
First, in his original budget, Sandoval had proposed transferring $127.5 million from the Highway Fund, which is the amount of car tab tax increases first passed in 2009, as part of the “sunset” taxes. With the total tax package growing to $1.48 billion, lawmakers reduced the Fiscal Year 2017 transfer from $64.1 million to $32.1 million.
Second, the timing of the Commerce Tax collections is awkward. Nevada’s Fiscal Year runs from July 1 to June 30, but the commerce tax isn’t due until August 15. The first Commerce Tax payment is due August 14, 2016. Even though that is in FY2017, LCB will accrue it back and account for it in the previous fiscal year, “since that fiscal year is not officially closed until the third Friday in September.”
This accounting gimmick undercuts the argument made by opponents of the Commerce Tax referendum that, if voters roll back the Commerce Tax, a budget hole will be created. Repealing the Commerce Tax and corresponding MBT tax credits in November 2016 would actually produce a fiscal benefit to Nevada through June 30, 2017. Around $45 million in MBT tax credits will be repealed, while the $119.8 million in collections wouldn’t have come in until August 2017. This gives the 2017 Legislature plenty of time to make any adjustments that would be needed.
Third, these taxes funded a massive expansion of government. In FY2015, Nevada’s General Fund collected $3.22 billion. In FY2016, Nevada will collect $3.55 billion, a 10 percent increase. If you consider transferable and other tax credit programs, tax revenue will go from $3.24 billion to $3.73 billion, a 15 percent one-year increase.
In short, Sandoval and the 2015 Legislature funded a massive expansion of government with a tax increase that turned out to be even larger than originally advertised.
Victor Joecks is executive vice president of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. For more visit http://npri.org.