Sandoval’s tax hike higher than reported

Victor Joecks

The tax increases on Nevadans being proposed by Republican Gov. Brian Sandoval are even higher than first reported.

That’s what a spreadsheet prepared by the state’s nonpartisan Legislative Counsel Bureau and given to lawmakers shows.

In total, finds the LCB, the tax package sought by Sandoval exceeds $1.3 billion.

Previously, while the Sandoval tax increases were acknowledged to be the largest in Nevada history, they were reported to “only” total $1.1 billion.

The total increase in spending projected by the governor’s budget would, if passed, be $1.8 billion above current levels. Added to the $1.3 billion in new taxes would be about $500 million transferred into the general fund and into the Distributive School Account.

Transferred would be some $183.9 million that is currently slated for the state highway fund, which would go into the general fund, and $308.2 million taken from local room-tax revenues, which would become a permanent part of the school account.

The LCB spreadsheet was distributed to legislative leadership January 16. The chart does label its findings “Preliminary – Subject to Revision,” but represents the best information available.

LCB finds that what’s commonly being reported as making up Sandoval’s $1.1 billion tax increase is just the amount his proposed general fund budget exceeds the revenue projections of the Economic Forum.

Without tax increases, the Economic Forum projects Nevada will collect $6.33 billion in general fund taxes, while Sandoval wants general fund spending of $7.44 billion.

That $1.11 billion difference, however, includes taxes the governor previously pledged would “sunset.” They include almost $184 million in government services tax collections — referred to in Carson City as “car tab” taxes — that are currently scheduled for the state’s transportation fund. Sandoval now would instead make them a permanent part of the general fund, raising general fund taxes to $930.1 million.

Atop that general fund number would be laid the governor’s proposed $376.6 million sales tax increase and the $12.6 million in net proceeds of minerals tax pre-payment that would go directly into the Distributive School Account.

That $389.2 million, combined with the general fund $930.1 million, produces the true size of Sandoval’s proposed tax increase: a whopping $1.319 billion dollars.

Sandoval also wants to divert $308 million from the 2009 room tax increase into the DSA, bringing his proposed spending levels to $1.8 billion above current tax collections.

Proposed general fund tax increases

Amount

Net Proceeds of Minerals

$8,200,000

Sales Tax Commissions-LSST

$2,800,000

Slot tax

$39,000,000

MBT – Mining

$14,600,000

MBT – Nonfinancial

$277,200,000

Cigarette Tax

$78,300,000

Business License Fee – Current

$72,500,000

Business License Tax

$437,500,000

   

Proposed general fund tax increase total

$930,100,000

   

Proposed DSA tax increases

 

Net Proceeds of Minerals (DSA)

$12,600,000

Local School Support Tax

$376,600,000

   

Proposed DSA tax increase total

$389,200,000

   

Total Tax Increase

$1,319,300,000

Some confusion in numbers stems from the complicated way Nevada structures its education funding. Instead of all education spending coming from the general fund, some “local” sources of revenue are credited to the Distributive School Account, with state general fund dollars supplementing those funds to create a minimum level of state education funding.

Running so-called “local” taxes through a state-created and controlled account to meet state funding obligations for education may just be a fig leaf lawmakers have historically used to circumvent Nevada’s constitutional prohibition on a state sales tax greater than two percent. Regardless, it makes accurately reporting on the size of Nevada’s state budget complicated.

Viewed another way, these numbers show that LCB predicts that the so-called “sunset taxes” that Sandoval wants to make permanent would cost Nevada taxpayers almost $750 million in the next two years.

Proposed “Sunset” tax increases

Amount

Net Proceeds of Minerals

$8,200,000

Sales Tax Commissions-LSST

$2,800,000

MBT – Nonfinancial

$277,200,000

Business License Fee – Current

$72,500,000

Net Proceeds of Minerals (DSA)

$12,600,000

Local School Support Tax

$376,600,000

   

“Sunset” tax increase total

$749,900,000

   

Proposed new tax increases

 

Slot tax

$39,000,000

MBT – Mining

$14,600,000

Cigarette Tax

$78,300,000

Business License Tax

$437,500,000

   

Additional tax increase total

$569,400,000

   

Total Tax Increase

$1,319,300,000

For comparison, LCB projected the 2003 tax hike, which created the modified business tax and included a number of other tax increases, to take $836 million out of the private economy.

Included in his proposed tax hike of $1.319 billion, Sandoval wants to create a new version of the margin tax that voters just rejected 4-to-1, called the Business License Tax.

In total, Sandoval’s tax proposal would raise taxes as much as low-end projections of the recently defeated margin tax that Sandoval and Republican elected officials justifiably warned voters would devastate the economy.

Victor Joecks is executive vice president of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. For more visit http://npri.org.