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Committee chair spars with opponents of Modified Business Tax extension

Michelle Rindels
Michelle Rindels
Megan Messerly
Megan Messerly
Legislature
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A bill that could bring the state $98 million over the next two years — and that could test the boundaries of a constitutional provision requiring a two-thirds vote to raise taxes — drew emotional testimony Thursday about funding education and fulfilling promises.

The Assembly Taxation Committee voted on party lines to pass AB538, which would maintain the current rate of the Modified Business Tax (payroll tax) rather than letting it drop as required by a 2015 law. Democrats, who are one vote shy of a two-thirds majority in the Senate, are advancing the bill even though there are legal questions about whether they can enact the tax without Republican support.

A legal opinion from the Legislative Counsel Bureau says they only need a simple majority, but the question could very well end up in court, jeopardizing the revenue attached to the bill. The tax extension is part of Gov. Steve Sisolak’s agenda, though recent cuts to the budget appear to have freed up roughly $250 million and may make the MBT money less necessary, Republican lawmakers said Thursday.

“Our opposition stems from our concern for the erosion of the two-thirds rule,” said Michael Pelham, lobbyist for the Nevada Taxpayers Association. “We felt the Legislature should err on the side of caution and use the two-thirds rule anyway. If the two-thirds requirement doesn't apply to sunsets then it's not a stretch before it gets weakened to other areas too.”

Brian Wachter of the Retail Association of Nevada, who testified against the bill, said the opinion was based on “courts and constitutions” in other states and would change Nevada’s historical interpretation of the provision. He also said the “buydown” provision was the product of a compromise when lawmakers passed a tax package in 2015, meant to guard against a windfall from the untested Commerce Tax.

“That particular requirement was not self-imposed by the Legislature. It was a demand placed upon the Legislature by the people of the state of Nevada,” he said. “We think that the power in this building flows from that consent and while it's normally wielded by you folks and our representatives, when the people directly express that power, we think that that's something you should respect and continue.”

Democratic Assemblywoman Dina Neal, the committee chairwoman, pushed back on the implication that the bill was legally dubious.

“I don’t think that this Legislature, number one, is violating the consent of people. I also don’t think this Legislature is taking the business relationships lightly,” she said. “We are trying to fund government, right? We're trying to make it whole and fund health, fund education. And I think those things are important.”

And she pushed back on the idea that the bill would go against the Constitution.

“We had ... a legal opinion on the two-thirds. We did. And so what else are we supposed to do but follow the legal opinion?” she said.

The technical debate came against the backdrop of a larger discussion over funding for education. Nevada has ranked highest in the country for class size and among the lowest for academic achievement, and one of the biggest questions of the session has been whether the state can raise teacher salaries and more fairly distribute funding without spurring painful cuts at schools.

“As many of you know, our schools are in dire need of finances and the loss of this would impact us severely,” said Washoe Education Association President Natha Anderson. “The loss of this, I'm not sure what that means. Our class sizes would become larger, the distance between for our bussing area would have to grow, and it could also be even a decrease of our employees."

The bill now heads to the full Assembly for a vote.

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