Letter: Gross receipts tax is dangerous

Wednesday, Feb. 5, 2003 | 9:03 a.m.

In response to Jeff German's Jan. 17 column "Union has food for thought in tax debate," and his follow-up piece on Jan. 22, "Chamber puts itself in a spot," I must comment that misinformation is more dangerous than no information, and if columns of this nature are to be written, they should be accurate because a lot of people are misled.

In the first, German compares California's 8.8 percent tax on corporate revenues with Gov. Kenny Guinn's proposed 0.25 percent levy on gross receipts, implying that our neighboring state has a much higher tax. Corporate revenues reflect operating profit or EBITDA, earnings before interest, taxes, depreciation and amortization. Gross receipts are all sales of a company regardless of profit. For example, a company with sales of $40 million and EBITDA of $1 million would be taxed $88,000 in California, but would incur a tax of $100,000 in Nevada even though it might be showing a loss.

With regard to the second column, he again confuses the issue by stating that Guinn had "raised the threshold" for collecting the gross receipts tax to businesses that earn more that $450,000 a year. Gross receipts do not equate to earnings. A company could be losing money hand over fist for the last three years and still be liable for the gross receipts tax that could push them further into the ground. American Airlines just released figures showing a loss of $529 million for the quarter and would still be obligated to pay a gross receipts tax on all ticket sales if domiciled in Nevada.

The information in German's essays is very misleading and written to fool people into believing this is a piddling tax that anyone would almost be unpatriotic not to accept. On the contrary, it is a dangerous tax that will cause more unemployment and/or bankruptcies. If there has to be a tax increase, a higher sales tax or gasoline tax would be a better alternative.

MURRAY FINDLEY

Editor's note: The writer is chairman of Sobel Westex, a national linen distributor headquartered in Las Vegas.