Guinn rules out any sales tax on services

Tuesday, Jan. 7, 2003 | 11:11 a.m.

CARSON CITY -- A proposal by big business, including the Las Vegas Chamber of Commerce, to impose a sales tax on services to help Nevada solve its financial crisis was torpedoed by Gov. Kenny Guinn only hours after he was inaugurated for a second term.

But Kara Kelley, president of the Las Vegas Chamber of Commerce, said she doesn't think Guinn and the chamber are at odds. She said she did not see the statement by Guinn as a setback to the plans of the chamber to advance the sales tax on services.

Guinn said at a news conference Monday that the proposal by the Las Vegas Chamber of Commerce and some other business groups "is not going to work. And they know that."

One key element of the chamber's plan is to levy a sales tax on discretionary services to raise $500 million to $600 million.

"If they think this governor is going to pass on a direct tax to our people, like a sales tax, they've got another thing coming when they get to the legislative session," Guinn said. "That's all I'm going to say about that."

Kelley, in Carson City to attend the inauguration, said the chamber's plan does not hit the average workers.

"We believe the (sales tax) base can be expanded so the burden will be placed on people able to pay for it," she said.

For instance, she said the sales tax could be placed on engineering or architectural services or on contract lobbyists.

Kelley said she has not had an opportunity to talk with Guinn about his new opposition to the sales tax expansion.

Guinn has yet to unveil his plan on tax increases.

Assembly Speaker Richard Perkins, D-Henderson, has predicted that some type of business tax would be passed from his house to the Senate. And he criticized big business for trying to avoid a tax.

The governor said he has been able to reduce the expected $800 million deficit for the next two years by a series of cuts and some extra federal funds coming into the state. But Guinn would not say what the new shortfall projection is. Guinn said he is examining one suggestion from the chamber and his Task Force on Tax Policy to increase the $100 annual tax business pays on each employee.

"That's something we will look at," he said. "(The chamber) may not be looking at the same figure I'm looking at. They might change their mind once they see that."

A proposal has been made that the business activity tax and cigarette and liquor taxes be raised early in the 2003 Legislature to get a head start on the deficit. Guinn has said that he would seek the cigarette and liquor tax increases immediately, but he said the annual per-employee tax will have to wait.

"We're not going to put something in early to have it fail early and not have full and open discussion," Guinn said. Guinn said there would be an "open discussion" on a business tax. Guinn's Task Force on Tax Policy has recommended a one-quarter of one percent taxon gross receipts of Nevada businesses, a suggestion opposed by the chamber.

"The reason we can't put in a gross receipts tax (early) is it takes 18 to 24 months to implement," Guinn said.

Kelley complained that the gross receipts tax has been open for discussion for only 20 months. She said everything will be on the table for discussion by the Legislature.

The concern of the chamber is the huge shift in the last 50 years from the purchase of goods to the purchase of services, Kelley said. Nevada has one of the most narrow sales tax base in the country, she said.

The chamber's suggestion is to "exclude the necessities of life" from the sales tax, such as health care and child care, she said.

During his inaugural speech, Guinn said, "It is not enough to establish a goal to just be average." He said Nevada must continue to advance in health, education and public safety.

The Nevada State Education Association, an organization of teachers, said Nevada ranks 44th in per-pupil expenditures as compared with other states. When asked about that, Guinn said he was working toward bringing Nevada up the average.

County school superintendents say more than $800 million is needed to address the problem, and they have indicated they may sue to get the funds. Guinn said he has met with the superintendents and they understand the state's budget plight.

There have been suggestions from legislators as to where state government can be cut. Guinn said there has been an idea to eliminate the state printing office, which would save $5 million a year. But he said private business would have to do the work, so it might end up costing more.

Guinn said he was encouraged by President Bush's economic stimulus package, announced today, that may mean more money for the state.

"We have not always got our fair share (of federal funds) for growth," Guinn said.

Guinn said $30 million to $32 million in federal funds is coming to the state from the federal No Child Left Behind education act.

But he called that amount "terribly insufficient."

Clark County would receive about $22 million and have to spend $4 million to $6 million to meet testing requirements under the act.

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