Business tax issue is a gamble either way

CARSON CITY – When it comes to a business tax in Nevada, there are sure things and there are rolls of the dice.

The sure thing: If the Legislature refuses to adopt the Nevada State Education Association’s 2 percent business margins tax in the next 38 days, it will go on the ballot in November 2014.

The roll of the dice: whether voters will approve it.

Nobody in the capital – even the teachers union is skeptical – expects the Legislature to OK the union’s tax as it stands. That would require a two-thirds vote in both houses (one Republican in the Assembly and three in the Senate would have to vote aye, assuming every single Democrat supported it).

It would have to survive a gubernatorial veto, since Gov. Brian Sandoval has declared he won’t sign off on any new taxes, beyond his approval (once again) of extending supposedly temporary taxes. That could mean not one but two votes for taxes, including – for any defecting Republicans – a vote to reprove a governor of their own party.

(I’ve said before, however, that Sandoval wouldn’t mind subtracting an issue that will attract pro-union, pro-tax, pro-education-spending voters to the 2014 ballot, when he will be on the ballot as well. But the governor clearly could not embrace even a compromise proposal without losing credibility.)

A tax plan on the ballot would be a risk for Nevada’s business community, which fought the NSEA’s initiative all the way to the state Supreme Court. The political campaign against the measure will surely be just as tough.

(The opening salvo, provided by state Senate Minority Leader Michael Roberson, is to call it an "income tax," notwithstanding the fact that the constitution specifically bans income taxes but allows business taxes.)

Whether the tax will pass or not is a mixed bag. Voters last year rejected various tax increases – for new school construction (by a 2-to-1 margin!) in Clark County, for libraries in Henderson and Carson City, and for public safety and senior services in Washoe County. But all of those measures were taxes that voters pay directly: property taxes or car-registration fees.

A business tax, by contrast, would be paid indirectly. Costs may be passed along in the form of higher prices, unless for competitive reasons businesses are unable to raise prices. But voters wouldn’t see the hit directly.

Not only that, but the argument that businesses (other than casinos) pay no tax on revenues in Nevada currently will persuade many people, especially when they learn the very same businesses pay those taxes in the states that surround Nevada.

So, the question becomes, why roll the dice at all? Why not make a deal on a more acceptable business tax while the Legislature is in session, fixing the problems that have been identified in the union’s proposal in the process?

If the money goes to schools and raises enough money, even the teachers union might be persuaded to abandon the initiative and embrace a compromise measure that begins to raise revenue this year.

Republicans still would have to be convinced. Roberson said he wouldn’t automatically reject a business tax, although he said he’d have to see the details before he’d agree to anything. But he said one area was non-negotiable: He wouldn’t agree to any net increase in taxes.

"I’m open to broadening the tax base in a revenue-neutral manner," Roberson said.

Of course, that defeats the purpose of the petition – additional revenue for schools. And that undercuts any possibility of a deal that would be acceptable to the teachers.

Ultimately, there are no sure things in politics.

Sometimes, it comes down to choosing the best roll of the dice.

Steve Sebelius is a Review-Journal political columnist and author of the blog SlashPolitics.com. Follow him on Twitter (@SteveSebelius) or reach him at (702) 387-5276 or ssebelius@reviewjournal.com.