Business tax proposal overhauled

Erin Neff

Tuesday, May 22, 2001 | 10:32 a.m.

CARSON CITY -- Sen. Mark James introduced a business tax proposal Monday he said is both fair to small companies and a good first step in addressing the state's flawed financial structure.

"This is the revenue side to a very difficult problem," said James, R-Las Vegas, shortly after a draft of his bill was printed Monday evening. "If we're going to close our eyes and walk away from this session pretending there's not a problem ... we've done a disservice."

James' bill, which was the subject of a public hearing in his Judiciary Committee this morning, would generate a "conservative" $65 million annually by increasing franchise fees for all of the 170,000 companies incorporated in Nevada.

The revenues would be earmarked for increased teacher salaries. Each Friday as Southern Nevada lawmakers fly home to Las Vegas, they have been greeted in the airport by a throng of teachers wearing Save Our Schools shirts.

On Friday one of the many signs singled him out -- "Thanks Sen. James" -- for the proposal about to come.

Under James' plan, companies with the largest amount of assets in Nevada would pay the most on a graduated scale.

The annual franchise fee would range from $150 for a company whose net worth in Nevada is between $25,000 and $40,000 to on the high end of the scale a $50,000 annual fee for corporations with $25.6 million or more in net worth in Nevada.

James said that although many lawmakers have expressed concern with his plan throughout the weeks of its creation, he said he believes the proposal is equitable.

Roughly 87 percent of all corporations registered in Nevada will pay the minimum $150 fee. Less than 500 corporations will pay the maximum $50,000 fee.

Companies subjected to the highest fee include Wal-Mart, Target, Wells Fargo, Park Place Entertainment and Stations Casino Inc.

"We've taken pains to ensure that if you're a corporation who's small, you pay on the low end," James said. "It's based upon wealth of a corporation, and it doesn't matter what type of corporation it is."

The annual franchise fee will raise an estimated $52 million. Another $13 million will be raised through increases in various fees paid to the Secretary of State's office.

James admits he will have to spend the remaining days of the session trying to convince his colleagues that the plan is important.

"I have talked to a lot of them about it as it's been developed," James said. "There aren't simple solutions to issues like an under-funded state budget."

Previously James introduced a $500 annual fee to be levied on all companies, regardless of size. Small businesses like law firms and doctors' offices complained, saying the increase from the current $85 was too high.

James then decided to offer a rebate of up to $100 per worker to companies who pay the state's business activities tax.

The negotiations over the past few weeks led James to pull that proposal and concentrate on the sliding scale franchise fee. Senate Democrats were critical of the initial plan and could likely derail the latest effort.

The measure requires a two-thirds majority vote to pass; meaning just eight Senators could kill the proposal. Republicans hold a 12-9 majority in the Senate.

James said that while Gov. Kenny Guinn has pledged no new taxes this session, he believes the governor's staff will evaluate his proposal and make a decision based on its merits.

"I think it's important to have it out there," James said.

Lobbyists from the teachers union, Las Vegas Chamber of Commerce and casino and mining industries crowded outside James' office Monday to grab a copy of the proposal.

Chamber officials have previously said they do not believe any new tax or tax increase should be implemented this session, arguing that a comprehensive study during the interim is needed to address a critical shortage in school funding statewide and the state's budget shortfall.

Lobbyists had no immediate comment Monday evening on the proposal, but were grousing privately about the sundry fee increases -- outside of the franchise fee -- that are included in the bill.

James settled a dispute raised earlier by resident agents who worried that his initial plan -- to impose a $500 fee regardless of net worth -- would force them out of business.

In negotiations, resident agents told James they could pay $165 annually. His proposed $150 annual fee is $65 more than they have paid each year since 1991.

James also said the revenue estimates are conservative at $65 million because they are based only on the number of companies currently doing business.

The legislation could spark additional companies to relocate to Nevada, James said, because the maximum fee is $100,000 less than that charged in business-friendly Delaware and the bill grants companies greater immunity from lawsuits in a way only Maryland offers.