Meeting yields hint of progress

Wednesday, July 9, 2003 | 11:17 a.m.

CARSON CITY -- A warmed-over plan to impose a service tax on professionals such as engineering, advertising and accounting, has been revived in an attempt to break the stalemate in the Nevada Legislature.

Assembly Majority Leader Barbara Buckley, D-Las Vegas, said today the proposal was made Tuesday to Assembly Minority Leader Lynn Hettrick, R-Gardnerville, whose caucus has blocked any tax package so far.

"This is the eighth proposal we've made in the last three days," Buckley said. The service tax would not be levied on such things as haircuts and lawn mowing, she said.

Hettrick said that the offer had promise and that the legislative staff is running the numbers to see how much it would generate. It was proposed by Assembly Speaker Richard Perkins, D-Henderson, in his meeting Tuesday with Hettrick in Carson City.

Both Perkins and Buckley said this would only be a piece of a tax plan. The two Democrats said it doesn't tax the big out-of-state corporations who are making money here but are not contributing to the needs of the state.

Hettrick and 14 other Assembly Republicans favor a payroll tax in which the employer pays a certain percentage of the first $21,500 in wages of the worker. Democratic members favor a gross receipts or a net profits tax aimed at business.

"Forty-seven other states have a net profits tax which is fair," Buckley said. She said a payroll tax has been defeated in every other state.

The payroll tax, she said, penalizes small business and hurts economic development.

Perkins said "Folks who make a lot of money in Nevada's should contribute to the economy."

He said companies like Dillard's, Wal-Mart, Home Depot and Target and "all the multi-state firms make a lot of money in Nevada, pay a lot of taxes in other states and don't contribute to the service products we have here."

But Hettrick said he's opposed to any income tax on business.

After the meeting Tuesday, Hettrick was upbeat about the new service tax proposal, which was part of a plan offered by the Las Vegas Chamber of Commerce.

But Perkins said, "It can be a piece of the entire puzzle. It cannot be the entire solution to the puzzle."

"It might help us to get where we're going," Perkins said.

Perkins, Hettrick and Assemblyman David Brown, R-Henderson, met for two hours Tuesday to discuss their differences on possible budget cuts and a tax plan to balance the budget which has stumped the Legislature in regular and two special sessions.

Perkins said the Legislature, which is in recess from the second special session, may be called back in next week, depending in part on the decision of the Nevada Supreme Court.

Two weeks ago, the speaker said there had been "significant progress" made in negotiations with Republicans. The deal fell apart by the afternoon. Then last Saturday, he said he was cautiously optimistic about compromise plan for an $803 million tax increase to include a net profits tax on business. Republican Assemblymen threw cold water on that idea Sunday.

Perkins Tuesday downplayed his new idea, saying "I threw out a couple of things. I haven't talked to my folks yet and he hasn't talked to his. It makes no sense if they don't have a whole lot of momentum."

The speaker said the casino industry should pay more but it should not be singled out. Gaming is "so labor intensive" that it probably would pay a little less under a gross receipts or profits tax than under the payroll tax, he said.

"But the intention of the gross receipts is that it is so-broad based that everybody is paying just a little bit," the speaker said. A company would pay $25 in taxes on $10,000 of gross receipts, he said. That comes under the proposal of 0.25 percent on the gross receipts of a business.

But Hettrick said the new proposal was a "variation" of some of the other taxes. "It's a business tax that would be more acceptable to us. It would not require a Nevada IRS and would be easier to account for. We're flushing it out to see if it works."

"We think it has aspects about it that makes it more palatable for our group and still broadens the business tax base what they (the Democrats) need," Hettrick said.

Hettrick was also more optimistic about reaching agreement on a reduction on the $4.9 billion budget.

"It looks like we're $20 to $35 million apart," Hettrick said. "That is probably one-tenth of 1 percent of the $3 billion budget were apart. We ought to find some king of solution there if we can come us with something we agree to on taxes."

Perkins said Hettrick wants to scale back the enrollment increases approved for Senior RX and Nevada Checkup, programs that provide insurance for the low-income elderly and for children from working poor families.

"We have great concerns about that," he said. In addition, he said the GOP wants to reduce the predicted recipients in Medicaid that provides medical care for the needy over the next two years.

"They're even trying to re-project (the number of cases) on Medicaid. That affects seniors' long-term care. We'd make our last stand in trying to protect Medicaid and those seniors. If it ends up being a sticking point, than that's not one we're going to budge on," Perkins said.

The GOP Assembly has developed a list of potential cuts but has not released details.

There have been discussions about cutting or delaying the start of the 2 percent pay increases for schoolteachers, state workers and university faculty to start in July 2004. Scrapping the salary hikes would save an estimated $50 million that year.

Perkins said the teachers deserve a two percent age raise and the state employees will go for two years before they get a cost-of-living increase. "This is where our people dig in," he said.

Buckley said Hettrick, in the meeting Saturday, also threw out a suggestion of delaying building a new mental health hospital in Las Vegas, that had been approved by both houses.

The Legislature has passed a $3.2 billion two-year budget to run state government but the Assembly has not approved the $1.6 billion for school aid for the biennium.

Republicans want to shave about $103 million from the budget so the required tax increase would be about $760 million. Hettrick said he thinks some GOP members would agree to that.

Perkins had initially offered a reduction to $783 million but he said Tuesday, "Going back and analyzing that, we probably could not have reached that. It was quickly put together and we found some problems."

Last Saturday, leadership agreed on an $803 million figure for the tax to balance the budget. "My read is that $803 million is the lowest we can get." He said he doubts the Democrats and the Senate would agree to go lower than that.

Perkins said he would be talking to some of the 15 Republicans who so far have refused to vote for a tax bill, in hopes of getting them to change their minds.

Meanwhile the Nevada Congress of Parents and Teachers Association submitted a "friend of the court" brief to the Nevada Supreme Court supporting Gov. Kenny Guinn in his petition to force the Legislature to approve a school aid bill and a tax bill to balance the budget.

The PTA brief, written by Las Vegas attorney Keen L. Ellsworth, said it is not taking a position whether the Legislature to increase taxes to cover the entire state budget. "Rather, the Nevada PTA is imply demanding that the Nevada Legislature provide the needed funding for the public schools of this state."

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