Guinn Signs $836 Million Tax Bill

Nevada Budget Crisis
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Gov. Kenny Guinn ended months of rancorous legislative debate Tuesday when he signed a record $836 million tax bill that will fund schools and the state's $5 billion budget over the next two years.

The tax increase is the largest in state history and represents what the Republican governor said was a"Herculean effort"to convince lawmakers in both houses that Nevada needed to diversify its tax base, which relied heavily on gambling and sales taxes.

"It's a relief for everybody in the state,"Guinn said after signing the bill at 2:08 p.m."It's got a form of a broad-based business tax."

Guinn didn't gloat over the tax bill, which met stiff resistance from a group of Republican Assemblymen who had vowed not to support any tax increases of more than $805 million after originally drawing the line at $700 million.

Guinn, a former school district superintendent, said funding the $1.65 billion education budget and opening the state's public schools on time was the most important achievement.

"The real victory here is that the schools will be open,"he said.

Guinn would not concede he failed to broaden Nevada's tax base as much as he would have liked.

"I'm not disappointed,"Guinn said of the bill that was delivered to his office for the signing ceremony on a silver platter

Guinn originally had asked for about $1.1 billion in new taxes that included a gross receipts tax. It was heavily criticized as excessive in a state known as fiscally conservative and tax friendly.

"I don't think anything is a defeat. ... when you come out with $836 million,"he said at a news conference in his office.

Legislators already were fleeing Carson City after 169 days of debate that had stretched into two angry special sessions, prompted a flurry of legal action and divided lobbyists protecting powerful gambling and banking interests. As the debate dragged on, the Nye County School District delayed its opening date and other districts said they would run out of money next month.

The deadlock was broken late Monday night when ranking GOP Assemblyman John Marvel decided to vote with the Democrats and four other Republicans for the $836 million tax bill. SB8 passed 28-14 in the Assembly and 17-2 in the Senate, a two-thirds majority in each house. Nine Republicans and eight Democrats voted in favor of the plan in the Senate.

Guinn said he worked the phones until the final vote in the Assembly secured SB8's fate.

"We had a good feel for it,"he said."But until somebody actually pushes the button you don't know."

"John Marvel can have just about anything he wants,"Guinn said with a smile.

SB8 includes funding for education and unprecedented tax increases on businesses, casinos, liquor and cigarettes. The new plan includes a 2 percent payroll tax on banks. Other businesses will pay a 0.7 percent payroll tax the first year and a 0.65 percent payroll tax the second year.

The legislation doesn't contain a bank franchise fee or a statewide 1 percent tax on hotel rooms, which satisfies gambling companies. The gambling tax will increase by 0.5 percent to 6.75 percent.

At least $810 million in new taxes were needed to balance the two-year budget, Guinn said.

Guinn said he will not repeat the"painful process"and try to increase taxes again in the next legislative session when the state is projected to have a $200 million revenue shortage.

"I'm not going to go through this again in two years,"he said.

Monday night's votes in the GOP-controlled Senate and Democrat-dominated Assembly came after a historic 6-1 decision by the state Supreme Court that said the need to fund schools outweighed the voter-approved constitutional requirement that two-thirds of lawmakers must approve tax increases.

A panel of federal judges temporarily halted implementation of the state high court's decision before ruling last week that they had no jurisdiction and let it stand.

Republican lawmakers have asked the Nevada Supreme Court to reconsider its decision, and could appeal to the U.S. Supreme Court.