NEVADA NEWS & VIEWS 02/07/2015

Brian Sandoval’s Billion-Dollar Somersault
By Allysia Finley

While Republican governors across the country are proposing tax cuts, Nevada Gov. Brian Sandoval is seeking to impose the largest tax hike in his state’s history. The 51-year-old governor—a former state attorney general, federal judge, and the first Hispanic elected to statewide office in Nevada—has been among the GOP’s rising stars. Some politicos have even floated Mr. Sandoval as a potential vice presidential pick, or a challenger to Harry Reid in 2016.


But Mr. Sandoval’s stand on taxes brings to mind Florida’s Republican Gov. Charlie Crist , who sold out to the teachers union by vetoing a school-reform bill in order to enhance his political stature with the goal of running for Senate in 2010. He didn’t make it to the Senate and was defeated by Rick Scott when he tried to return to Tallahassee as governor last year.

Mr. Sandoval rode into office in 2010 on a no-tax pledge, promising to phase out supposedly temporary sales and business tax increases that the state’s then Democratic legislature imposed over the veto of Republican Gov. Jim Gibbons in 2009. (Nevada does not have an income tax).

Mr. Sandoval kept his promise until the Nevada Supreme Court in May 2011 blocked the state’s plan to raid local government reserves. Thereafter he backed a two-year extension of the sales- and business-tax hikes—and a year later he expanded Medicaid under the Affordable Care Act.

Despite rebounding sales- and gambling-tax revenues—about half of Nevada’s general fund—Mr. Sandoval pushed in 2012 for another two-year tax extension, to pay for rising Medicaid expenses and prevent cuts to K-12 education. In 2013, Republican moderates joined Democrats to extend the tax increases through June 2015.

To ward off a serious primary challenge in his bid for re-election in 2014, Mr. Sandoval steered right. His campaign website boasted that he had increased spending on education by “$486 million over the last two years—without raising taxes” and promised “more education funding” with “no new taxes” if re-elected.

He promoted a tax credit for businesses that contribute to private-school scholarship funds.

Mr. Sandoval also vigorously opposed a referendum backed by the teachers union to create a new business “margin tax,” based on gross receipts, to fund schools. “The proponents of new taxes, like any good marketer, ignore what’s unpopular about the product,” he declared in a March 2014 speech. “Instead, they point to the alleged benefits of the tax, rarely mentioning the costs.”

Nearly 80% of Nevadans voted down the teachers-union referendum in November as Mr. Sandoval crushed the weak Democratic challenger, Bob Goodman, taking 70% of the vote. The governor claimed credit for sweeping unexpected GOP majorities into both chambers of the legislature that gave Republicans unilateral control of state government for the first time since 1929.

But once he was safely re-elected governor, Mr. Sandoval in January pitched a third extension of the sales and business-tax increases—and an increase in another tax, a graduated business license fee. Under his proposal, the current business license fee would vary by industry and be based on gross receipts. Most small businesses grossing less than $250,000 would pay about $400, double what they do now. But a real-estate firm earning $8.5 million would owe $24,231 while a farmer making the same amount would be dinned $6,106.

Nevada boasts a relatively business-friendly climate due to the absence of a personal and corporate income tax. However, its tax code is complicated, narrowly-based and heavily dependent on tourism and gambling. The governor claims that his “hybrid tax model” is the “least complicated” way to raise revenues and that it borrows “the best attributes from a true gross receipts tax, a margins tax and a business license-fee structure.” The Nevada Policy Research Institute, a free-market nonprofit, says the plan is unnecessarily complicated and resembles the margin tax that voters rejected in November.

The governor wants to dump most of the $1.1 billion in projected revenues raised from his proposal into education, including new, unproven programs for failing schools. His proposal to create “Victory Schools” aims to improve student learning by providing more “family engagement” and “professional development.” Then there’s the new Safe and Respectful Schools Office, whose mission is to prevent cyberbullying. Notably absent from his budget are any tax credits for private-school scholarships.

Democrats are cheering. “I never imagined the day when a Republican governor would be proposing things I’d been fighting for all this time,” said state Sen. Mo Denis of Las Vegas. Republicans legislators appear to be lukewarm. While the Senate majority leader has shown cautious support, many Assembly Members are outright opposed. Conservative activists have threatened to recall members who vote for a tax increase.

That means Mr. Sandoval will need to win nearly unanimous support from Democratic lawmakers in both chambers. This could require him to abandon second-term policy objectives such as public union collective-bargaining reform. By becoming a champion of higher taxes, the governor has drawn applause from liberal media and boosted his bona fides as a so-called common-sense, compassionate conservative.

Many a Republican has taken this easy middle road. But few have gotten very far on it.

Ms. Finley is an editorial writer for the Journal.