Lawmakers take first look at tax proposals

Erin Neff

Wednesday, Feb. 12, 2003 | 11:03 a.m.

CARSON CITY -- Lawmakers who took their first crack at Gov. Kenny Guinn's proposed budget Tuesday quickly realized there were more questions than answers.

The joint Assembly and Senate Taxation committees held a hearing on a proposal that is not yet in the form of a bill and does not yet have all the loose ends tied up.

Assemblyman John Marvel, R-Battle Mountain, asked Guinn's deputy chief of staff Michael Hillerby whether the governor's proposed 15-cent property tax increase would be added to the $3.64 cap or exempted from it.

Hillerby answered that either was possible. Marvel then asked which option is in the governor's bill.

"Neither," Hillerby said.

Question by question, lawmakers were told the governor was "willing to work with you," or that "we don't know that."

Hillerby said that as long as lawmakers kept the total revenue needed in their minds, he didn't care how they got there. Tax rates could be tweaked up or down provided exemption levels were changed or other programs were cut.

"Is the governor's message, 'Here's my suggestions?' or 'Here's my proposal?' " Assemblyman David Goldwater, D-Las Vegas, asked. "Are there some things in this proposal that are matters of principle?"

Without the benefit of Guinn's 175-page tax bill, lawmakers began pondering other tax options and decrying the most controversial part of Guinn's plan -- the gross receipts tax.

Sen. Randolph Townsend, R-Reno, suggested one goal the state should have is to encourage businesses to provide good wages and benefits to their employees. Although he did not specifically propose an exemption to the gross receipts for such a company, many thought he was heading that way.

"Obviously anything else we can do to encourage what you term good jobs, we'd be happy to work with you on," Hillerby said.

After the hearing Townsend said he wanted to explore whether the state could give such companies a tax break.

"Were the gross receipts tax to be part of this proposal in the end, part of the debate should be how do we incentive-ize people," Townsend said.

Senate Taxation Chairman Mike McGinness, R-Fallon, said that while the state does offer some tax incentives for new businesses through its economic development process, he did not think such incentives would help sell the business tax.

"We all have concerns that by instituting a gross receipts tax, we might be hurting the state's ability to attract businesses," McGinness said.

After the hearing Goldwater said he thought any proposed credits against the gross receipts tax based on the level of wages or benefits a company offers is a debate that should have occurred before the Legislature convened 10 days ago.

"The opportunity to propose that kind of a tax system was at the discretion of the task force and then the governor," Goldwater said. "If we wanted a net profits tax or something along the lines of what Sen. Townsend's talking about, we could have before, but now we're at a different stage in the process to start proposing new taxes."

Goldwater said lawmakers got a proposal Tuesday with "no detail," and with the answers to most questions "I don't know, or we're willing to discuss them."

"If the governor's proposal is something that's going to morph into some war between interest groups and not be fair to the citizens of the state, it's not worth it," Goldwater said.

During the hearing, Sen. Joe Neal, D-North Las Vegas, asked Hillerby if he had a representative model for how the proposed gross receipts tax and gross gaming tax increase would impact a casino given credits that company would get for paying the business activity tax.

Hillerby had no such model.

Under Guinn's proposal, after the gross receipts tax comes on line in 2006, companies subject to that tax would get a $100-per-employee credit on the business activity tax, provided the credit is not greater than the gross receipts tax owed.

The business activity tax would also drop for all companies from $300 to $140 per employee per year when the gross receipts tax comes on line. The tax is currently $100 per employee per year, but would triple under the governor's proposal.

The confusing tax credit portion made one point very clear to Assembly Minority Leader Lynn Hettrick, R-Gardnerville.

"If a gaming company has no net win, they have no gross gaming tax to pay," he said. "Every other business would."

Hettrick opposes the gross receipts tax because he said it is unfair to low-margin businesses and would result in too much trouble to implement given the amount of revenue it would bring in.

"It appears to me that for 10 percent of the state budget and for collection costs of $10 to $15 million, it just isn't worth it," Hettrick said in an interview after the hearing.

Nevada Taxpayers Association President Carole Vilardo said that even if credits are applied to the gross receipts tax based on a company's wages and benefits, the tax is "still too problematic."

Vilardo said businesses cannot properly budget for a gross receipts tax, and she warned the rate of the proposed tax set by the governor is not in stone.

The proposed tax would be one quarter of 1 percent on all gross receipts over $450,000. Roughly 62 percent of all Nevada businesses, and nearly all small businesses, would be exempt from the tax.

"Do you believe that government will not want to do more next time?" Vilardo asked.