Week 9: Cigarette and Liquor Tax Bills To Be Heard

(Sean Whaley/Nevada News Bureau) – Tax revenues, or more specifically the lack thereof, have been topic No. 1 during the 2011 legislative session.

Thus far it’s been mostly talk, with GOP Gov. Brian Sandoval saying no to any new taxes or fees and some Democrat lawmakers saying additional revenues are essential to preserve education and critical social services. Republican lawmakers thus far are standing with the governor.

But the tax debate is going to get down to specifics in week nine of the session when two tax measures, one to raise liquor and cigarette taxes, and a separate measure to increase the cigarette tax only, will be heard by two different legislative panels.

The Assembly Taxation Committee on Tuesday will take up Assembly Bill 333, which would raise taxes on hard liquor by 25 percent from $3.60 to $4.50 a gallon. Taxes on beer and wine would increase as well.

The measure, sponsored by Assemblywoman Peggy Pierce, D-Las Vegas, would also increase cigarette taxes from 80 cents a pack to $1.70 a pack, for a 112.5 percent increase.

Together the increases on these “sin” taxes would generate about $250 million to the general fund over two years, according to a fiscal note from the Nevada Department of Taxation.

Also on Tuesday, the Senate Revenue Committee will take up Senate Bill 386 to increase the cigarette tax to $2 a pack, a 150 percent increase.

Cigarette and liquor taxes were last increased in Nevada in 2003.

The American Lung Association of Nevada is seeking the cigarette tax increase in SB386, but Amy Beaulieu, director of Tobacco Control Policy for the organization, will be testifying in support of both measures.

“We see it as a health impact fee,” she said. “Not only will it generate new revenues for the state, but we will see a 16 percent decrease in youth smoking.”

The increase in the price of a pack would also cause an estimated 16,000 adults in Nevada to quit, Beaulieu said.

Nevada ranks 35^th now in the state tax imposed on a pack of cigarettes at 80 cents. New York is the highest at $4.35 a pack, while Missouri is lowest at 17 cents, she said.

Over 3,000 postcards in support of an increase in the cigarette tax have been delivered to Sandoval, Beaulieu said.

A number of other tax measures have been introduced this session, including one that would increase the amount of taxes collected from the mining industry, one to tax bottled water and another to impose a tax on some services. This measure, also sought by Pierce, would also extend the June 30 sunset on sales and other tax increases approved by the 2009 Legislature to fund the current budget by two years, to June 30, 2013.

None have yet had hearings.

These other revenue measures do not yet have fiscal notes indicating what kind of revenue would be generated if they were to become law.

Senate Majority Leader Steven Horsford, D-Las Vegas, said lawmakers on the Assembly and Senate money committees have completed a review of Sandoval’s proposed two-year, $5.8 billion general fund budget. Lawmakers are now considering what cuts in Sandoval’s budget should be restored, and what level of new tax revenue will be needed to fund those “add-backs.”

Sen. Sheila Leslie, D-Reno, said the amount of new revenue needed to fund the budget will be known in the next few weeks.

In the discussion on taxes earlier this week, Horsford said there must be a review of the state’s revenue code, “in ways that fund education and other vital services.”

Horsford has also expressed concern about some of the one-time revenues Sandoval is proposing to use to balance his budget, suggesting they will create a hole in future budgets, forcing the Legislature to engage in a never-ending discussion of revenues and creating ongoing uncertainty in the business community about the state’s tax policy.

“I’m concerned that if we don’t take this opportunity to reform our revenue code in responsible ways that we’re creating even more uncertainty for the private sector, because now we’re choosing to have a discussion about revenue every two years,” he said.

It takes a two-thirds vote to raise taxes. Democrats do not have enough votes to increase taxes without some Republican lawmaker support.

In response to Horsford’s concerns, the Sandoval administration said lawmakers should focus on finishing work on the upcoming two-year budget in the short time remaining in the session rather than worry about spending in 2014 or 2015.

State Budget Director Andrew Clinger said he expects there will be some additional revenue available to restore some of the cuts in Sandoval’s budget when the Economic Forum meets May 2. The panel of private sector fiscal experts will revise their projections one last time on that date.

Any additional revenue would be used to restore cuts based on the top priorities of Sandoval and lawmakers.