Tax legislation facing Senate test

Monday, July 14, 2003 | 11:27 a.m.

CARSON CITY -- A bill that would raise taxes by $788.6 million over the next two years, hitting businesses, banks and entertainment events, cleared the Assembly on Sunday but was expected to face a tougher fight today in the Senate.

Assembly Minority Leader Lynn Hettrick, R-Gardnerville, whose group of GOP members has battled the tax bill, said: "I don't think it will pass in the Senate. The fight is not over."

Using the state Supreme Court's ruling, the Assembly used a majority vote to pass the tax plan, revising a Senate bill to add a larger tax on business.

The bill now goes back to the Senate, which passed a different version of the plan last month.

Some of the Republicans in the Legislature filed a suit in the U.S. District Court in Reno today to overturn the ruling of the Nevada Supreme Court that invalidated the two-thirds majority tax requirement.

"The Nevada State Assembly has already violated the due process and equal protection rights of the plaintiffs by acting in violation of the clear constitutional mandate of the people of Nevada," the suit says.

The GOP members and other citizens ask the federal court to issue a temporary restraining order to stop any tax plan that does not have a two-thirds vote.

Other details were not immediately available this morning.

Democratic leaders, who backed the tax bill, conceded there may have to be some changes. Assembly Speaker Richard Perkins, D-Henderson, said he would meet today with Senate leadership to see if a compromise could be reached.

Republican senators have opposed a franchise tax on business, such as the Assembly passed. If there is no agreement, then it probably heads for a Senate-House conference committee.

The Assembly passed the bill 26-16 with Republicans Josh Griffin of Las Vegas and Jason Geddes and Dawn Gibbons, both of Reno, joining the 23 Democrats.

Hettrick tried a final parliamentary move to derail the bill, saying a two-thirds vote was necessary for approval. He said the Nevada Supreme Court, in its decision last week, did not declare the two-thirds vote requirement unconstitutional.

The 26 votes were two shy of the two-thirds requirement. But Perkins told Hettrick that the legal counsel for the Legislature said only a majority vote was needed.

The court ruled that the two-thirds majority rule must give way to the constitutional mandate to fund education, which is part of Senate Bill 6.

Assembly Majority Leader Barbara Buckley, D-Las Vegas, in arguing for support of SB6, said the Legislature had a choice to "hit the everyday Nevadan with a new tax or impose a small business tax."

She and other Democrats said the tax was lower than similar business taxes in nearby states.

Nevada, she said, lags behind other states in mental health, programs for the disabled and education.

"I'm tired of being last," in every category, Buckley said.

Hettrick said the tax plan would have a "chilling effect on the business and job economy." He suggested it would create a "Nevada IRS" with the Nevada Taxation Department hiring more than 40 additional workers.

Assemblyman John Carpenter, R-Elko, argued that the taxes would hurt efforts to draw new business to the state.

"I'm not a lover of banks. But I don't want to drive them out of here," he said.

Assemblyman David Goldwater, D-Las Vegas, said the bill won't drive out the banks. They will come where the deposits are, he said.

The tax bill would raise $788.6 million. Another pending bill raising fees in the secretary of state's office would add $45.7 million over the two years, for a total of $834.5 million. Perkins said Senate Bill 2l would probably be passed today.

SB6 calls for employers to pay a 0.5 percent tax on the first $21,500 of wages of a worker; imposes a 4 percent tax on net profits of financial institutions; and levies a franchise fee on total revenue collected by business.

When the payroll tax goes into effect in January next year, the $100-per-employee tax is repealed.

The franchise fee is a tax based on annual gross receipts.

Before the final vote, Democrats amended the bill to exempt businesses that collect less than $500,000 a quarter from paying any tax. Perkins said that would exempt about 60 percent of the companies in Nevada. Financial institutions would not pay this tax in addition to their specific levy.

The current 10 percent casino entertainment tax would be extended to every gaming business with more than 51 slot machines if they staged an event.

Under a Democratic amendment, those gaming businesses with less than 51 slots or nongaming businesses with less than 300 seats, would be exempt from the 10 percent entertainment fee.

Places that had between 300 and 7,500 seats would pay a 10 percent entertainment tax on admissions, food and beverage. Those above 7,500 seats would pay a 5 percent admissions tax, but it would not be extended to food or beverage.

Assemblyman Ron Knecht, R-Carson City, called the bill "the first step in turning Nevada into East California."

But Assemblywoman Chris Giunchigliani, D-Las Vegas, said the plan "allows our constituents not to go into their own pocket." The plan, she said, doesn't provide for a sales tax, a property tax or a tax on renting videos or going to the movies, as had been suggested during the regular session.

While the tax hits casinos, it does expand the tax base to bring in other businesses, she said. The gaming business will have to pay an additional 0.5 percent on gross win and will pay the franchise fee on nongaming business.

But the Assembly bill eliminates the 1 percent room tax that was included in the Senate version. The Senate version called for a 1 percent payroll tax, a 3 percent tax profits of financial institutions but did not have a franchise fee on all business.

With the secretary of state fees, the Assembly plan will require $830.5 million in new taxes for the biennium.

The Senate's bill calls for $863 million in new taxes.

In the Assembly, that was reduced by $30 million as members decided to eliminate $30 million that was to go into the rainy day fund.

Hettrick also asked the Assembly to approve drafting a continuing resolution to provide money to schools in the interim until the tax plan is approved by the full Legislature. He said it would not be easy to get agreement on taxes and some schools are facing deadlines in hiring teachers.

"We're trying to make sure education gets funded," Hettrick said.

But Buckley called that "a step backwards."

"That's accepting failure," Buckly said. "That's unacceptable."

She said a continuing resolution would mean the schools would get the same as they did last year, rather than the increased money called for in SB6.