Tax talk will be focus of Nevada Legislature

CARSON CITY, Nev. (AP) -- A day after Gov. Brian Sandoval released his $6.5 billion state budget proposal and delivered his State of the State address, it became clear that tax talk would dominate the upcoming session of the Nevada Legislature.

Sandoval says he's willing to extend some taxes to balance his budget, but the Republican governor says he'll oppose any new taxes from state lawmakers.

Democrats counter that the Republican governor's initiatives to expand full-day kindergarten and English language learner programs — and the funding he's proposed to expand those programs — don't go far enough to restore deep cuts made to education since 2009 when the Great Recession drained Nevada's coffers that are heavily reliant on sales and casino taxes.

"During the 2011 session, Gov. Sandoval proposed significant amounts of cuts to our schools," said Senate Majority Leader Mo Denis, D-Las Vegas, on Wednesday after Sandoval delivered his State of the State. "This year he is promising the world, but his policies won't change our schools soon enough."

Democrats have stopped short of saying they'll seek tax hikes in the legislative session that begins Feb. 4, but say Nevada's tax structure will be on the table.

"There is a tax structure discussion that has to be had," said incoming Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, on Wednesday. Two years ago, Democrats floated a tax proposal late in the session. Kirkpatrick said this session will be different.

"We're starting on Day 2, and we're going to educate people on what they pay to the state," she said, adding, "I don't believe that business is willing to not contribute anything on a state level."

Hovering over the entire tax debate is a looming opinion by the Nevada Supreme Court on whether an initiative pushed by the state teachers union to impose a business margin tax will live or die.

A lower court judge struck down the Education Initiative, saying the required description of its effect was misleading. But supporters gathered 152,000 signatures — more than double the amount needed to send the issue to lawmakers next month or voters in 2014.

A ruling from the high court is expected before the session starts.

Initiative backers say imposing a 2 percent margins tax on businesses with income of more than $1 million would bring in $800 million annually.

Sandoval's budget proposal for K-12 is $2.4 billion for the next two-year spending cycle, an increase of $135 million from the current budget.

Nevada's higher education system would receive $974.6 million under the governor's budget, but under a new funding formula for the state's universities and community colleges that would see more money going to schools in southern Nevada than the north.

Sandoval also proposes to cut payroll taxes for 2,700 businesses, costing the state $24 million. "That means that since 2011, we will have eliminated the burden of this tax on almost three-quarters of Nevada's small businesses," the governor said his State of the State address.

The governor said the tax break will help those businesses meeting the demands of providing health insurance for workers under the federal Affordable Care Act.

"Let me be clear," he said. "Nevada's employers cannot afford higher taxes and I will not support them."

But Denis said the tax relief for businesses will mean Nevada residents will shoulder more of the burden to fund state government.

"We disagree with this approach," he said.