GOP unveils new fee to bolster state budget

Wednesday, May 16, 2001 | 11:07 a.m.

CARSON CITY -- The GOP unveiled the first phase of its plan Tuesday to raise $65 million a year in new fees to close the gap in the state's budget, and it sparked an immediate partisan battle.

Democrats say the plan would be unfair to many small businesses in Nevada that would suddenly see a jump in their tax while other businesses would be relatively unaffected.

The plan calls for all companies that register with the secretary of state's office -- whether they are based in or out of state -- to pay an additional $500 fee.

To help offset the impact of the new fee on Nevada companies, however, there would be an exemption on their business activity tax. This tax is paid at the rate of $100 a year for each employee.

Sen. Mark James, R-Las Vegas, who developed the plan, said most small businesses would pay less than they are now, a point disputed by Senate Minority Leader Dina Titus, D-Las Vegas, and other Democrats.

James himself, it was pointed out, has a small firm that would pay more. Because his law firm is incorporated, it is registered with the secretary of state. Other examples of companies that register with the secretary of state are partnerships and limited liability companies.

In James' case, he has one employee at his law office in Las Vegas. Therefore, his annual business activity tax amounts to $200. Under the GOP plan, he would get an exemption from that tax but would end up paying the $500 new fee for a net tax increase of $300.

Republicans sponsored Senate Bill 571 but because of this type of impact on many small businesses, Democrats refused to sign on to it.

The bill would allow all Nevada businesses, whether they are incorporated or not, an exemption of $500 a year on their business activity tax. This would be to offset the new $500 fee imposed by the secretary of state on those who file in his office.

For instance, a company registered with the secretary of state's office that pays a business activity tax of $600 a year on its six workers would get a $500 break on that levy. But it would pay the new $500 fee. So the total tax bill would still be $600.

It's a wash for most corporations, James said.

Those Nevada companies registered with the secretary of state's office and who have less than five employees, would also gain the exemption. But some of those companies have only two or three workers and pay $200 or $300 a year to the state. They would be exempted from paying that tax. But they would have to pay the new $500 fee to the secretary of state.

Titus said there are more accountants or consultants or other individuals who have incorporated with the secretary of state than James is willing to acknowledge. She said these people may employ only themselves or one or two other workers, which would saddle them with an inequitable tax increase.

They would get the business activity tax break but would still have to pay the $500 fee, whereas in the past they may have paid much less.

Titus said she wants to see how this plan would fare with Gov. Kenny Guinn, who has vowed to impose no new taxes or fees on Nevadans.

James wants the money raised by the tax to go to education, possibly funding a 2 percent pay raise this year for teachers and 2 percent next year.

He wondered how the Democrats would oppose the bill when they have been supporting more money for teachers salaries.

Titus said Democrats support a raise for teachers. But she called this a "quick fix" as opposed to addressing the major financial problems of the state.

Hearings on the plan may begin by Friday.