Monday, Sept. 16, 2002 | 8:44 a.m.
Members of the Nevada Tax Task Force were told Friday they could essentially wipe out the state's deficit without imposing a new business tax or hiking gaming taxes.
But doing so would create a hodge-podge of tax spikes from increased levies on cigarettes and liquor and higher property taxes and business fees. And the result of such a mix-and-match approach to filling the anticipated $2 billion shortfall would also mean no increased spending for anything.
Thus the panel, appointed by Gov. Kenny Guinn, struggled through the daylong session without resolution and without all members and invited speakers keen on the gross receipts business tax.
"We seem to have been railroaded in that direction," panelist Eva Garcia Mendoza, a Las Vegas immigration attorney, said.
Panelist Luther Mack, who owns a number of McDonald's franchises in the Reno area, wasn't satisfied with the nonbusiness levy scenario, saying he wanted to jump right into a bigger solution.
But later, when the other scenario's numbers were shown, he asked: "Isn't there something else we can do so that small businesses aren't impacted?"
Both comments followed a presentation from Las Vegas Chamber of Commerce President Kara Kelley, in which Kelley expressed the business organization's willingness to accept new taxes, but reiterated fears that a gross receipts tax could be inequitable.
A gross receipts tax could be imposed with exemptions on a business' first $200,000 of revenue, leaving most small businesses with a $500-a-year tax bill.
Panelist Mike Sloan was disappointed Kelley brought only two anecdotal references to how such a tax would impact smaller businesses. And he curtly responded to her statements by comparing the Nevada proposal to a similar tax employed by Washington state.
"In Washington the tax is imposed after the first $25,000 and at a rate twice as high," Sloan, an executive with Mandalay Resort Group, said.
Kelley said she had been unable to survey most of the chamber's membership and had no alternative plan to offer.
"What you're telling us is you've had the same amount of time as we have, and you haven't yet done that," said panelist Brian Greenspun, president and editor of the Las Vegas Sun. "It seems almost disingenuous, and I know you don't mean that, for the chamber to suggest that (a gross receipts tax) is a burden."
The task force was created at the close of the 2001 Legislature, when lawmakers failed to come up with any meaningful solution to the state's budget crisis. The panel is set to report by Nov. 15 and make recommendations the Legislature will consider when it convenes in February.
The state has a current $253 million deficit and an additional projected shortfall of $119 million, to start the next biennium down $370 million. The shortfall will grow to more than $2 billion by the 2010 fiscal year, in part because projected revenues from the state's main source of income -- sales and gaming taxes -- have not met expectations, and Nevada receives no other significant tax revenue.
Although last Friday's meeting will be continued Wednesday, the panel is down to its last 60 days of deliberations and must decide quickly on the business tax to compute how the smaller levies -- like those on property, cigarettes, liquor, amusements and slot route operators -- should be imposed.
Jeremy Aguero, an economist volunteering his time for the panel, said if the panel accepted the first scenario -- the one without a business tax -- the state would still see an eroding tax base, because the revenues raised under that scenario will not be greater than the rate of inflation.
Some of the decisions the panel will make in the coming weeks will be about which taxes should be imposed at which rates.
One scenario would raise the state's property tax cap of $3.65 per $100 of assessed value by 10 percent for fiscal year 2003, with additional five-cent increases in fiscal year 2005 and fiscal year 2008.
Cigarette taxes would rise incrementally until the per-pack tax hit 60 cents in 2004. Nevada currently has a 35 cent per pack tax on cigarettes.
An amusement tax -- a levy on movie tickets, video rentals, nightclub admissions and other similar activities -- also is expected to be in the final recommendation.
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