Plan would eliminate Nevada business tax on small firms

Scott Reeder

Thursday, March 25, 1999 | 11:39 a.m.

CARSON CITY -- Nevada businesses, particularly small businesses, will get a break this year if a bill to cut the business tax passes the Legislature.

Currently, businesses must pay the state $100 a year for each person they employ.

Assemblyman John Lee, D-Las Vegas, wants to eliminate the tax employers pay on their first five employees.

"I think this penalizes people for creating jobs. By giving a break on the first five employees, we are able to help out all businesses -- especially small businesses," Lee said.

Lee said he is optimistic that Assembly Bill 428 will pass during this session. It was introduced in the Assembly Taxation Committee on Tuesday.

The bill is opposed by the Nevada Taxpayer's Association.

Carole Vilardo, a lobbyist for the association, told the committee that owners of small businesses object to the administrative hassles of paying the tax more than the amount they have to pay the state. She added this bill would not eliminate the required paperwork because businesses would have to file forms to be exempt from the tax.

But Lee said the tax cut has the potential for creating more jobs because businesses will have more money to hire and train employees. The exemption would be phased in over a five-year period, with employers being allowed to exempt one employee the first year and up to five the fifth year.

Lee estimates the bill would cost the state $860,000 the first year, out of the approximately $72 million it generates annually. He added the state estimates that after five years it could lose $4.7 million a year. But he says that figure is probably too high because it does not factor in economic benefits from the tax break, which he says would bring additional revenues through the creation of more jobs.

Assemblywoman Dawn Gibbons, R-Reno, said she likes the concept behind the bill.

"I think it is an extraordinarily pro-woman bill," she said. "I say this because women run many successful small businesses. I think it is a good idea to give this bill some support. But I would like to find a way of making it revenue neutral for the state."

One idea to do this would be to raise the business tax so that businesses with six or more employees are paying $119 each, Gibbons said.

"The benefit behind this is that it would give a break to small businesses that are just starting out," she said. "Once someone has as many as six employees, they can afford to start paying the tax because they are more established."

But Lee said Nevada's economy is doing well and the state can easily afford the tax exemption in the form that he has presented it.

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