Business tax abandoned; payroll tax likely fading

Wednesday, July 16, 2003 | 11:26 a.m.

CARSON CITY -- Plans for a broad-based business tax on either the profits or the gross receipts of companies have been abandoned, legislative leaders said Tuesday.

And a proposal for a payroll tax is on life support.

It was a victory for a group of Assembly Republicans who said they did not want to see an income tax on business, a move they said would force the state to create a "mini IRS" to collect the revenue.

A new tax package was expected to be rolled out today by the Senate, several hours after seven federal judges sitting in Las Vegas and Reno consider a suit that would require a two-thirds vote on any taxes passed by the Legislature.

The new package is expected to increase existing taxes.

Senate and Assembly leaders met behind closed doors for most of Tuesday. At the end of the day, Senate Majority Leader Bill Raggio, R-Reno, said the gross receipts tax recommended by Gov. Kenny Guinn and a net profits tax on business were discarded because they would not pass.

Assembly Speaker Richard Perkins, D-Henderson, acknowledged that the profits and the gross receipts plans would not get the two-thirds required. He also said his Democrats were not likely to pass a major payroll tax.

Senate Minority Leader Dina Titus, D-Las Vegas, appeared cautiously optimistic. "I feel we're moving toward some kind of consensus because of the pressure to adjourn is getting overwhelming," she said. "We just have to be careful that in the desire to go home you don't do something that hurts people of the state.

"One big broad business tax is gone. It won't be a payroll. It won't be a gross receipts. We'll probably look at existing taxes and try to increase some of those already on the books."

One item on the table is a proposal to raise the $100-a-year per-employee tax paid by business. Guinn originally recommended that it go to $300 as a "bridge tax" until the gross receipts tax could be put into effect.

The proposed tax plan is expected to collect $800 million to $860 million over the next two years.

Perkins said he was disappointed by Tuesday's developments.

"I think big business in our state should be stepping up," he said. "Our approach was always to look to big business, casinos and banks to fund education.

"Realistically, I don't think you can get two-thirds votes for those particular taxes (profits and gross receipts) so we're trying to find some other ways to balance the budget."

He said the payroll tax is "very offensive" to his caucus.

"It disproportionately hurts the small business in Nevada," he said.

Perkins said he believes the Assembly Republicans, who have blocked a two-thirds majority on a broad-based business tax, are acting to protect big business.

Assembly Minority Leader Lynn Hettrick, R-Gardnerville, could not immediately be reached for comment.

But Ranking Assembly Republican John Marvel, R-Battle Mountain, said the net profits and gross receipts taxes were "terrible."

"The people and business don't like those taxes and we're not here to pacify gaming," said Marvel. The casino industry had supported either a gross or a net profits tax to widen the tax base of Nevada.

Both Perkins and Raggio said they want a plan that can gather a two-thirds vote.

"Everybody is acting on the assumption that any plan will require a two-thirds vote," Raggio said.

Perkins and Raggio expressed hope they could pass a bill today and adjourn. But Perkins said there have been agreements before that have fallen apart.

Raggio refused Tuesday to reveal details of the new tax plan to be unveiled today because he said it would permit "everybody to start picking on us."

Asked what he thought the federal court might do today, Raggio declined to speculate. "It's highly unusual for a federal court to sit 'en banc.' I have not seen it," he said. "It means they are giving it high priority."

Perkins said pushing this issue into the court system "has degraded the institution" of the Legislature. Those people who want the federal system out of their lives are the very ones who have filed the suit in federal court, he said.

"This isn't for the courts to do," said Perkins. "It's for us to do."

Twenty-four Republican legislators and some trade associations filed the suit, asking the federal court to mandate that a two-thirds vote be necessary to pass any taxes. The Nevada Supreme Court ruled last week that a majority vote of the Legislature could pass a tax plan if it needed to fund the public schools.

The school aid bill has been tied to the tax package in the Assembly. The schools are facing deadlines in hiring new teachers for classes that start next month or early September.

"At this point the funding of education is so important that I think we need to get our work down," Perkins said. "The folks that have held up this process have successfully protected big business to the detriment of our schools."

Perkins said the delay in negotiations could preclude the schools from starting on time and prevent teachers from being hired.

The Republican minority has been able to hold the education hostage," Perkins said. "It's been a real cutesy approach. It's been a lot of grandstanding, a lot of sound bites on their part, but it all boils down to they want to protect big business at the expense of education.

"Some of those taxes were supposed to start July 1. So every day that we are here, (there is) less of a chance to capture the revenue we're supposed to capture."