Tuesday, July 22, 2003 | 11:20 a.m.
CARSON CITY -- Nevadans will pay more to smoke and drink almost immediately and, come January, will shell out more for most live entertainment events, under a bill passed by the Legislature Monday night.
And some lobbyists say the average person may find smaller raises in their future checks because of a new payroll tax on business.
The 2003 Legislature late Monday night enacted an $836 million tax plan over the next two years, drawing money from a variety of sources. Gov. Kenny Guinn is expected to sign the bill today.
Senate Majority Leader Bill Raggio, R-Reno, said a major accomplishment was that the lawmakers did not enact an income tax on business, as had been advocated by some.
Senate Minority Leader Dina Titus, D-Las Vegas, said the residents escaped without a property or a sales tax increase.
Carole Vilardo, director of the Nevada Taxpayers Association, said those who smoke and drink will see the increases immediately. A pack of cigarettes will rise 45 cents, and the liquor tax will go up 75 percent on Aug. 1, meaning about 5 cents more for a six-pack of beer.
The live entertainment tax starts in January, ranging from 5 percent to 10 percent, depending on the size of the event. If there is a seating capacity of 7,500 or more, there will a 5 percent tax. That would hit such events as NASCAR races or the National Finals Rodeo.
If the seating is less than 7,500, a 10 percent tax will be levied on the ticket, food, drinks and merchandise prices. The 10 percent, in part, is aimed at the large strip or topless clubs in Las Vegas. Clubs with less than 300 seating capacity and those small gaming operators with less than 300 capacity would be exempt.
No entertainment tax would be imposed on boxing events, which already pay a tax. And nobody would have to pay a tax on the musicians strolling through a restaurant.
Casinos would continue to charge the 10 percent entertainment tax as they have been doing.
Those who sell their homes or businesses will be hit with an increased tax. Starting in October the real estate property transfer tax takes effect at $1.30 per $500 of value. The tax on a $150,000 home would be $390. The buyer and the seller could negotiate who pays the tax.
Sen. Dennis Nolan, R-Las Vegas, who sells real estate, said there may be negotiations to lower the commission of the Realtor to offset the tax.
Workers may feel the tax increases on businesses in future raise packages. Because employers will pay a 0.7 percent tax on gross wages, minus a deduction for health care, they may find it more beneficial to increase health benefits or contract more workers, some experts say.
For example, a business with six employees and a payroll of $120,000 now pays $600 a year in taxes. Under the new system effective in October, the employer would pay $840. That would be an increase of $240.
If this same employer paid health insurance for his workers at $200 a month or a total of $14,400 a year, his new tax bill would be $739, or an increase of $139.
Vilardo said the tax could be a disincentive for businesses to boost wages, since it would run up the tax bill also.
Consultants and independent contractors would escape the gross wage tax, Vilardo said.
Danny Thompson, executive director of the Nevada State AFL-CIO, said businesses may instead put more money into health plans, where costs are rising rapidly. He said the medical costs jumped 12 percent last year but wages increased only 2 percent to 3 percent
The raises won last year by Culinary Union workers on the Las Vegas Strip went into health-care insurance costs, he said. By putting more money into health care, employers will receive a bigger deduction from the payroll tax and "workers will be healthier and happier."
"Employers would rather put money into health care than pay taxes," Thompson said. "The less they pay in taxes, the more they have for pay raises."
Ray Bacon, the director of the Nevada Manufacturers Association, said the average worker will see prices go up slightly. But he's not sure how employers will handle the increased taxes.
Bacon thinks businesses will want more productivity and may introduce better systems to offset the taxes.
Bacon said he doesn't think businesses will contract out more services, to escape the tax. Most major businesses now contract out for professional services.
The payroll tax will hit hardest at the companies with high-paid workers, the sort of industries Nevada is trying to attract, Bacon said.
Even those in the lovemaking business will feel the pinch. George Flint, lobbyist for the Nevada Brothel Association, said it will require its female workers, who are independent contractors, to pay the $100 annual business fee to the state Department of Taxation.
He estimates there are 1,000 of these women that would mean $100,000 in added taxes for the state. "Most of the girls work on a year-round basis so it would be $10 or $15 a month so it's not a prohibitive thing," he said.
The $100 fee would be imposed on every firm that does business in the state.
Some of the bigger brothels, with capacity of more than 300, may start charging a tax for the live entertainment. Flint said the brothel may impose a $30 or $40 entry fee to the customer. Part of that would go to the state for the 10 percent tax and the rest would be applied to the service cost.
"We want to be included" in the tax burden, Flint said.
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