Tax plan would exempt most state businesses

Monday, Aug. 26, 2002 | 10:37 a.m.

CARSON CITY -- Most Nevada businesses would be exempt from a proposed gross receipts tax under a plan being examined by the governor's tax task force.

Chairman Guy Hobbs said 70 percent to 80 percent of the state's businesses would gain an exemption that would protect small operators. The plan also may include an incentive for businesses that make major expansions in Nevada.

The tax plan is being developed for the Legislative Committee for Local Government Taxes and Finances, and Hobbs updated the committee on his panel's work Friday.

The governor's task force has not reached any final decisions, but members appear to be favoring the gross receipts tax on all businesses, including casinos, mining and insurance companies.

At a rate of one-half of 1 percent, the tax would raise an estimated $200 million a year to offset the growing deficit facing state government. Hobbs said the $200 million includes the exemptions for small business.

Sen. Mike McGinness, R-Fallon, chairman of the Senate Tax Committee, which would consider any tax plan, said he thought the proposal looked sketchy. He said he wanted to see more details. One of his concerns, McGinness said, involves possible impacts on small business.

Hobbs said the task force is considering exempting businesses that gross less than $150,000 or $200,000. No final figure has been reached, he said.

Sen. Joe Neal, D-Las Vegas, a candidate for governor, said he had some reservations. He said a casino would pay only an additional $38,000 for each $1 million it collected in gross win. Neal, who has been pushing a plan to raise the gross gaming tax from 6.25 percent to 10.25 percent, said the gross tax burden would fall on other businesses.

Hobbs said, however, that 10 years ago, 60 percent of a casino's revenue came from gaming. That has shifted so that now the casino accounts for 50 percent of a resort's revenue, and the other 50 percent comes from rooms, food, beverages and other sources.

The one-half of 1 percent would be applied across the board to the full gross revenue of a hotel-casino, he said.

The tax task force is also considering giving a partial exemption from the business head tax of $100 a year per employee. There would be a credit against the gross income tax.

Sen. Ann O'Connell, R-Las Vegas, said she wanted to know if there would be any incentive to expand under the proposed tax. Hobbs replied that the task force may include an exemption for capital investments in the state.

The task force estimates that if nothing is done, the state will face a $4.58 billion deficit by 2011. But Hobbs said his group also is looking at the yearly cash flow -- for instance, it estimated the state will be nearly $800 million in the hole in the next biennium.

Hobbs' panel is looking at several other tax proposals in an attempt to spread the tax burden, rather than hitting one segment of the population. Among these are raising the cigarette tax 25 to 50 cents a pack from the present 35 cents; boosting the liquor tax by the consumer price index; broadening the sales tax to entertainment and amusements; and boosting the property tax, possibly by 5 to 10 cents.

There is also a "passive revenue" plan to collect $20 million or more a year by streamlining the tax collection system, making businesses pay their taxes sooner and reducing the discount they get for collecting the sales tax.

All of this, Hobbs said, would finance government services at their present levels. It would not include enough money, however, to bring Nevada's support of its public schools up to the national average.

Meanwhile the legislative committee on local government taxes voted to draft several bills, including one to raise the cap on property tax from $3.64 to $4.04. The aim is to give local governments room to expand. Several counties are at the $3.64 limit now.

That committee, headed by Assemblyman David Parks, D-Las Vegas, also agreed to have a bill prepared to make sure local governments don't lose major revenues if a governmental unit buys a public utility.

The Southern Nevada Water Authority has proposed a plan to purchase Nevada Power Co. The water authority, if successful, would not pay many of the taxes now levied against the utility.

Nevada Power now pays $19.8 million in property taxes, divided among Clark, Nye and Lincoln counties. Clark County receives $18.5 million of the pot. Henderson gets $1.6 million from the franchise fees. The state receives $998,548.

Nevada Power pays $44.9 million in utility fees and business licenses. Las Vegas collects $18.9 million, Clark County gets $16 million, Henderson receives $5 million and North Las Vegas receives $3.9 million.

The state receives more than $10 million from the utility mill tax, the sales tax and the business tax.

An advisory group to the Parks committee said there could be a severe impact on local governments if Nevada Power is taken off the tax roll.

The committee called for a bill draft to "mitigate the loss of revenues to local governments and the state of Nevada as a result of such acquisitions or expansions."

The legislative committee also endorsed a proposal to allow the tax on gasoline to rise as the consumer price index goes up.