Governor hints at new taxes on liquor, cigarettes

Wednesday, Oct. 23, 2002 | 11:07 a.m.

CARSON CITY -- Gov. Kenny Guinn doesn't agree with those who say a potential gross receipts tax on business is unfair.

While saying there is "no good tax," Guinn said at a news conference Tuesday that casinos have paid a tax on their gross revenue before they can deduct business expenses or other taxes. And the casinos have paid the tax whether they earned a profit or not, he said.

Guinn said he is looking favorably on everything a state tax task force has endorsed, such as a one-quarter of one percent tax on gross receipts, an increase in the property, cigarette and liquor taxes and an amusement tax.

Guinn said he will present the Legislature a budget that includes new taxes, and he hinted that he would suggest an immediate increase in the cigarette and liquor taxes that haven't been raised in nearly two decades.

Senate Majority Leader Bill Raggio, R-Reno, said he was "open to look at anything" that is being proposed but added, "I have not made a commitment."

Raggio said he also wants to explore other options. In the past he has talked about shifting some of the taxes away from local government to the state.

Sen. Bob Coffin, D-Las Vegas, said he thought the proposed increase in the liquor tax was "reasonable" and it could probably be passed early in the session. But he said he's "on the fence" on the cigarette tax.

He said he's afraid that boosting the cigarette tax might lead to a black market with people bringing in supplies from Mexico. He also said he wanted to see how the tribal smokeshops will react, whether they will raise the price of their cigarettes or keep them the same. A lot of people, he said, now buy from the smokeshops.

On the gross receipts tax, Coffin said, "It's too complicated to give an answer at this time."

Since state law requires new taxes to be approved by at least two-thirds of each house of the Legislature, it would take only eight of the 21 state senators to kill a tax proposal.

Sen. Mike McGinness, R-Fallon, chairman of the Senate Taxation Committee, said Tuesday that if a vote were held today he believes at least eight senators would oppose a gross receipts business tax. That's because it could hurt businesses such as grocery stores that have large gross receipts but small net profits, he said.

But McGinness said the so-called "sin taxes," those involving cigarettes and liquor, stand a much easier chance of gaining legislative approval.

"If somebody doesn't want to pay those taxes, they can cut back on cigarettes and liquor or they can stop altogether," he said.

Guinn said he wants to more details on the tax plan being developed, such as how big the exemption would be on the business tax. The task force, which will issue its report next month, has tentatively agreed that the first $350,000 of gross business would be exempt from the tax, to shield "mom and pop" small businesses.

The governor said the state could face a shortfall in tax revenue this year of up to $350 million, up from a previous estimate of $300 million.

Critics of a gross receipts tax say it is unfair because it is imposed no matter what profits a firm makes. Two companies with the same gross receipts but one with a high profit margin and the other with only slim profits would pay the same tax.

Under the proposal, the one-quarter percent business tax would be imposed also on casinos, bringing their tax on gaming win to 6.5 percent.

"There are a lot of companies who pay virtually no taxes and they make a lot of money when you look at the net," Guinn said.

Nevada doesn't have a corporate income tax or a transaction tax, which many surrounding states impose, Guinn said.

Sen. Joe Neal, D-Las Vegas, the Democratic opponent of Guinn, said the gross receipts tax was not fair. The company would merely raise the price of the product to offset the tax and the guy on the street would end up paying for it, he said.

In addition, as prices rise to offset the gross receipts tax, the individual would get hit with increased sales tax, Neal said.

On the subject of a 6.5 percent amusement tax, Guinn said the task force was still "struggling" on what it should be imposed on. For instance, the task force isn't going to recommend it be levied on high school sports or nonprofit events.

It could be imposed on such things as movies, visits to topless clubs, motocross events, professional rodeos and concerts.

On another topic, the governor declined to say how he would vote on the advisory question in Clark County on the possible public takeover of Nevada Power Co. He said he wants to make sure that the $76 million being paid in taxes by Nevada Power is not at risk to local and state governments.

Sun reporter

Steve Kanigher contributed to this story.