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July 22, 2014

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Guinn says new taxes on horizon

Gov. Kenny Guinn said Tuesday his administration will need an additional $450 million to $500 million a year in new tax revenue just to stay even.

Coming on the heels of the recommendations of the Governor's Task Force on Tax Policy in Nevada to rebuild the tax structure and solve the state's budget woes, the governor indicated he would propose increasing the cigarette and liquor tax to take effect probably by March 1 in order to get more revenue this fiscal year. The so-called sin taxes can be raised without any new government machinery, Guinn said. The task force recommended raising the sin taxes.

But Guinn said he was still studying the task force's report and had not made a decision on the its recommendations of the task force including the the centerpiece of the plan, a gross receipts tax on business.

The Las Vegas Chamber of Commerce's board of directors this morning stated its opposition to the proposed gross receipts business tax. The chamber joins several Republicans, including Senate Majority Leader Bill Raggio, R-Reno, and Assembly Minority Leader Lynn Hettrick, R-Minden, as neither Republican leader favors the tax.

"We think it's a bad tax because it would not only affect different industries differently, it would impact similar businesses differently," chamber president and chief executive officer Kara Kelley said. "It would hurt low-margin businesses and start-up businesses."

The chamber, which represents more than 7,000 businesses, instead said it would support a broader sales tax to help the state solve projected general fund budget deficits.

"You can construct a sales tax to minimize its regressiveness and attach it to discretionary items," Kelley said.

The chamber decision opposing a gross receipts tax is a blow to recommendations forwarded to Guinn Nov. 15 by the eight-member tax task force.

The task force estimated that the state would have a cumulative budget deficit of $4.56 billion through fiscal 2010 if current programs were maintained but there were no increases in taxes.

One of its proposals was to establish a new one-quarter of 1 percent gross receipts tax on businesses that gross more than $350,000 annually. The tax would be on revenue from all goods and services, with businesses able to deduct $100 per employee from the tax.

The proposal was for the tax to go in effect in July 2004. Estimates are that it would raise $227 million in that first year, or more than half of what it would take to wipe out a projected $379 million deficit for the fiscal year that ends in June 2005. The balance of the deficit would be made up through a proposed new 6.5 percent entertainment tax and through increasing property and "sin" taxes, which cover cigarettes and alcohol.

Task force chairman Guy Hobbs said today that one advantage of the gross receipts tax is its stability.

"Nevada has been looking at different forms of business taxes for the past 10 years, and we don't have a lot of options other than gross receipts," Hobbs said.

But his task force also recommended that the Nevada Legislature study the possibility of expanding the sale tax base.

"It's a little premature to say whether that would give us a stable tax base because it depends on what services you're talking about taxing," Hobbs said. "Some services are more stable than others."

Sen. Joe Neal, D-North Las Vegas, sided with the chamber's stance on gross receipts tax, saying that ultimately consumers would pay the tax.

"I've been opposed to gross receipts tax all along," Neal said. "The tax could very easily be passed on from the seller to the buyer. It would be eventually a tax the public would have to pay."

Neal said a broad-based sales tax would also be passed on to residents. The answer to the state budget shortfall is taxing the gaming industry and developers, Neal said, hammering the position he has held for years. Assemblyman Bob Beers, R-Las Vegas, said there wasn't much he could comment on until he sees the budget. However, Beers sides with the chamber seeing several problems with a gross receipt tax.

"There are a lot of questions and resistance toward a gross receipt tax," Beers said. "It may violate the state Constitution."

Beers said a possible alternative could be reducing the rate of expansion that the state offers.

The governor intends to ask the Legislature to take $110 million out of the $136 million "rainy day" fund to get the state through the rest of the year. And he indicated in his budget for the coming two years, he may try to begin to replenish that fund, possibly with a $35 million appropriation.

He said the fund needs to be rebuilt in case of a terrorist attack or another unforeseen tragedy.

Asked if he might include any money in his new budget for pay raises for state workers, Guinn said he was concentrating on financing the present programs, including finding enough money to take care the estimated 20,000 new public school students next year.

Asked if he would recommend constructing the UNLV Science and Engineering Building, the governor said his first priority is a new mental health hospital in Southern Nevada. He has not made up his mind on other projects.

Guinn said he has met with Hettrick and will meet this week with Raggio and Assembly Speaker Richard Perkins, D-Henderson. The governor said he will send his budget to the printer Jan. 4. He still must wait for the tax revenue forecasts of the Economic Forum that meets Dec. 2. The forum, a group of five lay members, will predict the tax collections by the state during the next two years and Guinn will have to build his budget on that.

But the governor has made it clear on several occasions, he intends to ask for new or increased taxes to help fund existing program.

He is studying the proposed gross receipts tax.

"You have to look at organizations, such as car dealers, grocery stores and home builders where their gross is very high but their (profit) margin is very low," Guinn said. "Sure it is a concern. My job is to look at it and say, 'Can you make it as fair as possible?' "

Despite the contention of some of his colleagues in the Republican Party, the governor said he doesn't intend to cut anything else fro state government the rest of this fiscal year.

Culinary Union Local 226, meantime, continues to push for a broad-based business tax to help fund education. The union, whose members include food servers, bartenders and cocktail waitresses, is taking its grass-roots campaign through schools in an effort to reach parents.

Union members will be at C.P. Squires Elementary School at 1312 E. Tonopah Ave. in North Las Vegas on Tuesday morning. They plan to pass out literature to parents and pencils to students to get people behind a tax for big businesses.

"We already have one of the worst school systems in the county, and we need these big companies to step up to the plate and do their fair share," Culinary Political Director Glen Arnodo said. "I know that if we are going to save our educational system, the money has to come from somehwere."

The union has already begun an advertising campaign. Sun reporters

Judy Odierna and Adrienne Packer contributed to this story.

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