(Sean Whaley/Nevada News Bureau) – Assembly Minority Leader Pete Goicoechea said on Monday Nevada voters should be asked to expand the state sales tax to include food purchases as a way to raise revenue and broaden the tax base.
But any such revenue hike should be accompanied by a reduction in the state’s regressive business taxes, he said.
Asking voters to apply the two percent state share of the sales tax to food could bring in half a billion dollars over the two-year budget, he said.
Goicoechea, R-Eureka, said he believes new tax revenues will be needed to get a balanced budget in the 2011 session, but that any revenue increase should come in tandem with reductions in the modified business tax.
Goicoechea, interviewed on the Nevada NewsMakers television program, said he believes the state will be able to get by with less than $1 billion in tax increases.
“But I do believe we’re going to have to have some revenue increases, and I would hope they come in the way of reforms,” he said.
Goicoechea said it is unfortunate the sales tax expansion idea was not put before the voters in the upcoming November election.
Goicoechea said he is willing to look to expanding the sales taxes to services as well, but that any such expansion would have to cover all services uniformly. In the initial discussions on a services tax there are already groups clamoring to be exempted from such a levy, he said.
“If you’re going to put a sales tax on services, then no exemptions, everyone gets to pay,” Goicoechea said. “But let’s balance it with reducing some of these other very regressive taxes on business.”
Drastic budget cuts will also have to be a part of any balanced budget, he said.
The expansion of the sales tax while reducing the overall rate was proposed earlier this year by the Nevada Policy Research Institute.
Several members of the GOP caucus running for re-election this year had mixed reactions to Goicoechea’s suggestions.
Assemblyman Ed Goedhart, R-Amargosa Valley, said tax reform is fine as long as it is revenue neutral. Goedhart said the NPRI proposal to broaden the sales tax to include food and services is a good starting point.
The overall 6.85 percent sales tax rate could then be reduced to about 3.5 percent, and the state could also do away with the modified business tax, reduce or eliminate the insurance premium tax and significantly lower vehicle registration fees, he said.
The expanded sales tax would then allow the state to begin growing its way out of its fiscal problems, Goedhart said.
As chairman of the Nevada chapter of Americans for Tax Reform, Goedhart said total government spending on services in Nevada is about $40 billion, which puts the state in the middle of the states in spending per capita. The Legislature should have no trouble finding $3 billion in savings out of $40 billion in total spending to balance the budget, he said.
Goedhart pointed to excessively high public salaries such as those earned by firefighters as one example of where spending reductions can be made.
Assemblyman Tom Grady, R-Yerington, said any specific tax proposals are premature, and that the idea of going to the voters for an expansion of the state share of the sales tax to include food would not help in the upcoming biennium.
Since the proposal is not on the ballot for November, it would not be able to go to the voters until 2012, he said.
But Grady said with a shortfall that could be as high as $3.5 billion, “everything is on the table.”
“I agree with Mr. Goicoechea we’re going to have to look closely at zero-based budgeting,” he said.
But if the Legislature gets to the point where it can’t fund education or prisons, then it will have to find money elsewhere, Grady said.
The Legislature needs to wait to see what proposals the new governor will have, and it needs to know how short the budget is before there is a discussion of taxes, he said.
Assemblyman John Hambrick, R-Las Vegas, said Goicoechea’s proposals are not new but come from the NPRI study on expanding the sales tax released earlier this year.
“We need to look at the NPRI study at least as a starting point,” he said.
But the Legislature also has to keep in mind that the Nevada economy is suffering and businesses are not in a position right now to create new jobs, Hambrick said.
“We need to provide some relief,” he said.
Goicoechea has joined Senate Minority Leader Bill Raggio, R-Reno, and Senate Majority Leader Steven Horsford, D-Las Vegas, in saying taxes will very likely have to be part of any plan to erase a $3 billion shortfall in what is expected to be required to provide government services and education for the next two years.
Assembly Majority Leader John Oceguera, D-Las Vegas, has not weighed in publicly on the tax discussion. Oceguera is expected to become speaker in the 2011 session.
The two leading candidates for governor, Republican Brian Sandoval and Democrat Rory Reid, have rejected the idea of balancing the state budget with tax increases.
Goicoechea said the critical issue for the 14 Assembly Republicans in the November election is picking up at least one or two more seats to take away the two-thirds majority now held by Assembly Democrats. A two-thirds vote is required to raise taxes, and without at least 15 members the Assembly Republicans will wield little power in those discussions.
Budget discussions and the all-important debate over redrawing state political boundaries make it critical for Republicans to have enough members to have a place at the negotiating table, he said.
“You don’t want to be on your back when you’re waging a fight which you are if you are irrelevant and under 15 (members),” he said.
Seats Republicans see as potential take-aways include the open District 40 seat in Carson City and the District 13 seat in Henderson now held by freshman Democrat Ellen Spiegel, Goicoechea said. Republicans also want to hold on to the District 13 seat in Las Vegas that is now open with the departure of Republican Chad Christensen, he said.
Goicoechea said he is encouraged by some of the voter registration trends and the large number of nonpartisan and minor party voters who may support Republicans in November.
Hambrick said he believes Republicans have a few other opportunities to pick up Assembly seats in November. They include the open Assembly 31 seat in Sparks, the Las Vegas 5 seat held by Democrat Marilyn Dondero Loop, and the Henderson 29 seat held by Democrat April Mastroluca, he said.