New taxes likely to affect Nevadans in different ways

Friday, Nov. 15, 2002 | 5:52 a.m.

WEEKEND EDITION November 17, 2002

The impact a broad set of recommended new state taxes could have on residents hinges on how they live and spend their money.

But it is virtually impossible to calculate how a "typical" person would be affected by the recommendations from the Governor's Task Force on Tax Policy in Nevada.

Two Nevadans could own identical homes but have radically different tax burdens because of the way they spend their disposable incomes. A chain-smoking apartment dweller could absorb a bigger tax increase than a homeowner who pays property taxes but doesn't smoke.

That's why economic analyst Jeremy Aguero of Las Vegas cringes at any attempt to calculate the typical tax effect by merely dividing the $335 million in potential new tax revenues next fiscal year by Nevada's 2.21 million population. That works out to $151 per Nevadan but ignores the fact that tourists would also pay new taxes.

"That totally distorts the tax policy," Aguero, a task force consultant, said. "It would depend on the person and on the type of business."

The tax recommendations, which were finalized Wednesday, were forwarded Friday to Gov. Kenny Guinn and the state's Legislative Counsel Bureau. They include:

If approved by Guinn and the Nevada Legislature, most of the new taxes or increases in existing taxes would take effect on July 1. The intent is to help the state make up for projected deficits in the general fund budget, which pays for public services such as education, law enforcement and welfare.

While the eight-member task force aimed to make its recommendations as broad as possible, certain individuals clearly will be affected more than others. Here are examples:

Nevada Taxpayers Association President Carole Vilardo said an individual's ability to pay the taxes without enduring hardship will depend on the economy.

"Anybody who has their taxes increased will feel the difference, particularly if it hits their discretionary income," Vilardo said. "But if you have discretionary income, it doesn't always hurt you because you could modify what you do that is not essential to living.

"You might not use your car as much. Instead of going out every weekend you might not go out one weekend. Maybe it causes you to get an energy efficient audit so you can cut down on your electricity bills. The number of decisions one makes will depend on where we're at in terms of an economic rebound."

Tourists would be expected to contribute a sizeable chunk of the potential entertainment tax revenues. Vilardo said she doesn't expect that an entertainment tax on spectator activities -- which she said exists in at least 30 other states -- would cause a decline in attendance.

Keith Schwer, director of UNLV's Center for Business and Economic Research, said he agreed that an entertainment tax would be a "nonissue" for most people who attend spectator events.

"It's not going to have that big of an impact," Schwer said.

But there is a good chance tourists won't have to pay higher prices at resorts, even though gaming establishments would have to pay the new gross receipts business tax as well as recommended increases in alcohol taxes.

Alan Feldman, spokesman at MGM MIRAGE, said his company likely would absorb most of those tax hikes without raising prices because of the competitive nature of the gaming industry. Feldman said many gaming companies resist raising prices on items such as beer because those prices are often used as marketing tools.

"You can't raise prices on gaming since the prices paid by customers for gaming is set by them," Feldman said. "You can't tell people to gamble more just because your taxes went up, so it will affect the bottom line. In some selected areas, such as retail, there may be price increases. But we're talking about tax numbers that are relatively small."

Nevada Beer Wholesalers Association President Bill Gialketsis said a beer tax increase wouldn't necessarily result in less consumption. But he said it could lead to a change in customer buying habits.

"When beer gets expensive on one end they buy cheaper brands," he said. "In the past, when a certain category of beer got expensive or when times got rough, people traded down."

Consumers could also see price increases in new homes, cars and other goods if merchants choose to pass on the proposed gross receipts tax. Jack Stanko, owner of a Reno automotive dealership and secretary-treasurer of the Nevada Franchised Auto Dealers Association, said the proposed gross receipts tax would add $75 to the price of a $30,000 car.

But while that may not seem like much of a price increase to most consumers, Stanko said it would be viewed as substantial by rental car companies that buy fleets of vehicles from new car dealerships at $50 to $100 over invoice per automobile.

A one-quarter of 1 percent gross receipts tax could add $470 to the cost of a new $188,000 home, which is the median price of a new home in Las Vegas. But home builders estimate the real cost increase could exceed $1,000 because sub-contractors as well as contractors could be forced to pay the tax.

"It would add to the price of a home because it's another cost of doing business," Southern Nevada Home Builders Association spokeswoman Monica Caruso said.

Mark Doppe, president of home builder Carina Corp. and past president of the association, said entry-level consumers would be most impacted by a pass-through of gross receipt taxes.

"Any time we have a new tax the people on the edge of the market are the ones who get carved out," Doppe said.

If the proposed property tax increase is approved by Guinn and the Nevada Legislature, the owner of a $188,000 home would shoulder a $98.70 increase over existing taxes. Schwer said senior citizens on fixed incomes would be hardest hit by property tax increases.

"The property taxes in Nevada as opposed to other states are modest," Schwer said. "You may get a concern from seniors who find that their income is constant but that their taxes are going up."

The Legislature will consider a bill next year to implement a constitutional amendment approved by Nevada voters on Nov. 5 that would allow a low-income homeowner to defer a certain amount of property taxes until his home is sold or inherited. The amendment, Question 8, was placed on the ballot after bills sponsored by state Sen. Ann O'Connell, R-Las Vegas, passed the Legislature in 1999 and 2001.

O'Connell, who is preparing the enabling legislation, said it might allow low-income homeowners who meet poverty guidelines to defer any potential property tax increases. But she also expressed doubts that the proposed new property tax increases would even pass the Legislature.

"That will be one of the last things the Legislature will have sympathy for," O'Connell said.