Bankers criticize gross receipts tax, back levy on services

Kevin Rademacher

Thursday, April 24, 2003 | 9:53 a.m.

Contrary to recent suggestions, the Nevada Bankers Association is opposed to Gov. Kenny Guinn's plan for a gross receipts tax, instead throwing its support behind a sales tax on services.

Ken Ladd, president of US Bank's Nevada operations, said the tax on services would increase the banking industry's annual tax contribution by 50 percent. He said the industry currently pays about $29 million a year in taxes to city, county and state jurisdictions.

"That would focus the tax on the larger, growing part of the economy," Ladd said. "This tax would go directly to the state and not be filtered through city or county municipalities."

John Guedry, president and CEO of Business Bank of Nevada, said the sale of services currently accounts for about 60 percent of all sales in the state each year, a total of about $55 billion.

"It's a lot of money being left on the table," he said.

The bankers association has added that a clear definition of what services are taxable must be spelled out in an acceptable plan.

"We are focusing on services to Nevada business provided by Nevada businesses," Guedry said, adding that consumer-oriented services, such as haircuts, should be left untaxed.

That would appear to meet the bankers often-emphasized goal of supporting a tax that is not industry specific.

"We informed the Legislature on the record that we support a tax as long as it is fair, equitable and broad based," said Ted Wehking, executive vice president of the bankers association.

State bankers blasted Assembly Bill 517, which would levy a 14 percent franchise tax on banks.

"It certainly got our attention," Wehking said. "From day one, if you go back dozens of months, everyone was speaking in a manner that indicated a need for a broad-based tax. Then when an industry-specific tax like this one comes up, as I can see a franchise tax doesn't fit that standard."

Ladd said that bill appears to have been defeated.

"A franchise fee, that's not broad based," he said. "That's mean and cruel."

Bankers are also critical of Gov. Kenny Guinn's proposed gross receipts tax. Tod Little, chief executive officer for Silver State Bancorp, said a gross receipts tax would cut into capital needed to support growth and make loans.

"If we have less capital, we have to say basically that we are going to make less loans," he said. "I don't think that's good for the economy."

After recent headlines suggested the bankers association was backing the gross receipts tax, Little released a statement criticizing the perceived move. He has since stopped criticizing the bankers' organization -- and is arguing that a gross receipts tax would have a disproportionate affect on small banks.

Larger banks, he said, have access to a national pool of capital to meet loan requirements and fund growth.

"It truly is a significant difference from being a Bank of America to a community bank," he said.

Access to capital, however, doesn't appear to make a gross receipts tax any more popular with large banks.

"From a Wells Fargo perspective, the gross receipts tax is hard to define," said Kirk V. Clausen, president and chief executive for Wells Fargo Bank of Nevada. "It's so incredibly vague, it's one of those things that can get away from us."

He added that Wells Fargo serves states, including Washington, that already have a gross receipts tax.

"The states where we do have a gross receipts tax are not growth markets for us," Clausen said. "We're awfully worried about the impact."

Little said he would prefer an increase in property taxes to a business tax that will ultimately be passed on to consumers anyway.

"Nobody wants to talk about property taxes, but I'm a believer that people pay taxes -- not businesses," he said. "That's not a politically expedient answer, though."

He said a gross receipts tax is merely a bad idea in an arena of too few alternatives.

"It's saying we can't come up with a better idea so here's a really, really bad one," Little said. "That's a sad answer."

Guedry agreed that no plan, or a stop-gap measure, is better than approving a flawed proposal.

"I would rather see a temporary solution carried over to a special session or the next regular session rather than a bad tax plan imposed," he said.