James plans more business-friendly tax proposal

Monday, May 21, 2001 | 9:55 a.m.

CARSON CITY -- Sen. Mark James, R-Las Vegas, said changes are being made in his $65 million franchise-fee plan so that small businesses in Nevada won't be hit with higher taxes.

In addition, James said, he is developing an "alternate plan" to raise money to give schoolteachers raises in the next two years.

"I am making every effort to make this plan fair so it will not penalize anyone," he said, though he wouldn't reveal details.

His initial plan called for a $500 additional yearly fee on every corporation and business that registers with the secretary of state's office. It was aimed at collecting money from out-of-state corporations that don't have employees in Nevada.

To offset the hit on Nevada businesses, James offered a reduction of $500 to those who pay the state's business activity tax of $100 per worker per year.

But that plan left companies with fewer than five workers paying possibly hundred of dollars more than they currently do. They would pay the new $500 fee, but get a rebate of less than $500.

"I want to make sure that the people who truly don't have the ability to contribute more aren't asked to contribute more than their means," James said. "However, people have to realize it's time we took the next step to properly fund our education system."

Many of the small companies that could be affected are doctors, lawyers, consultants and accountants. James received an e-mail from one Reno doctor who said he was too busy taking care of patients to show up to testify, but he "strenuously objected" that he would have to pay an additional $400 a year.

"I didn't share much sympathy with the doctor worrying about having to pay $400 more a year to fund our education budget," James said.

He also brushed aside criticism from a prominent law firm in Nevada that his proposal would drive corporate business out of Nevada.

The law firm of Hale Lane Peek Dennison Howard and Anderson, which does extensive work in forming corporations and reorganizations, said the James fee would make it more difficult to persuade companies to incorporate in Nevada.

The firm said the progress made by Nevada in attracting new companies would be undone by the tax. Nevada has been trying to become the "Delaware of the West," mirroring the image of the tax-friendly Eastern state that has been successful in attracting corporations.

The law firm, with offices in Las Vegas, Reno and Carson City, said it would be less expensive in many instance for entities to form in Delaware rather than in Nevada.

"Delaware's annual franchise fees can be below $500 annual for several years for newly formed entities," the company said in a statement.

"To build a vital corporate base, we must attract companies at the time of formation, when costs matter the most," the lawyers said.

But James said incorporation fees in Delaware range up to $150,000. Noting it costs $85 to file incorporation papers in Nevada, he said his tax would not scare firms away from incorporating in Nevada.

James also brushed aside the law firm's suggestion that more study is needed. Only two weeks are left in this Legislature, and James said action is needed now.

"We have a crisis in the funding of our education system," James said. "If we ever want to be anything other than a state that is playing catchup, we are going to have to make some difficult decisions."