Task force to recommend gross receipts tax

Jace Radke

Thursday, Oct. 10, 2002 | 11:22 a.m.

The Governor's Task Force on Taxes decided tentatively Wednesday to rely on a business tax to cover the bulk of an estimated $4.2 billion deficit that the state will face by 2012.

The committee unanimously voted to have a gross receipts tax on businesses written into a draft of its recommendation to Gov. Kenny Guinn and state legislators.

The tax would exempt the first $350,000 of gross income, to help give small businesses some breathing room. Anything over that level would be subject to a tax of one-quarter of one percent, Chairman Guy Hobbs said.

The plan allows for a dollar-for-dollar credit of the state's business licensing tax, which costs employers $100 a year per employee.

"It's going to roll the two taxes into one," Jeremy Aguero, an economist working with the task force, said. "If you're over the $350,000 threshold you'll pay the gross receipt tax, and if you're under you'll pay the business licensing tax."

A draft of the report is scheduled to be completed in about three weeks when the task force will meet to make revisions in the plan. The committee's report will then go to the state Legislature next year. The Legislature and the governor will consider the report in preparing tax legislation to address the state's deficit.

Nevada Resort Association President Bill Bible said that the gaming industry understands the state's financial needs.

"We're certainly familiar with gross receipt taxes because we already pay a 6.25 percent tax on gross gaming receipts," Bible said. "This type of tax will stabilize and broaden the state's tax base.

"Right now gaming pays for a little over 40 percent of the state's budget, and this tax broadens the base so that everyone does their part."

Hobbs said he preferred a gross receipt tax over a margin tax or net profit tax.

"The lack of predictability is a huge issue for me with a net profit tax," Hobbs said. "The margin tax is a great theoretical thing to talk about, but the fact that there's no working model that we can use as a template is a concern."

The tax would generate $250 million a year for the state, under current variables, Aguero said. Task force members also discussed possible exemptions from the new tax, including operating incomes of public utilities, health insurance claims paid by health insurance companies, income and dues of non-profit organizations and pass-through income such as trust funds handled by an accountant or an attorney.

After discussion, the task force decided not to exempt improved real estate from the tax.

Task force member Brian Greenspun, president and editor of the Las Vegas Sun and a real estate developer, said he opposed the real estate tax exemption.

"Having said that," Greenspun said, "it is imperative that we keep home prices as low as possible." Greenspun said it was important for Las Vegas' economy not to price low-income people out of the housing market.

The final decisions on the exemptions will come when the task force reviews the report draft.

The task force also decided that raising and broadening the sales tax to transactions not currently taxed is something that needs to be looked at by a committee before a decision can be made.

Task Force member Nancy Wong studied the sales tax issue and came up with a long list of business transactions that could be taxed, including plumbing repairs, auto repairs, massages and car washes.

Task Force member Brian Greenspun, president and editor of the Las Vegas Sun, said that deciding what services to tax would take a year and recommended that Guinn appoint a committee to study the issue.

The committee is also considering a 6.5 percent amusement tax that would be imposed on for-profit entertainment events, memberships in golf or athletic clubs, movies, adult cabarets and professional sporting events.

Property taxes are also being considered, and an increase of 10 cents to 20 cents for each $100 of assessed valuation is under discussion. For a $150,000 home, that would mean an additional $52 in taxes a year.

Other recommendations the committee has made include boosting cigarette tax by 35 cents a pack, raising the levy on alcohol 70 percent and raising corporate filing fees paid to the Secretary of State's office by 50 percent.