Las Vegas Sun

March 29, 2024

Assembly Democrats offer new tax proposal

CARSON CITY -- After a day of little movement in the tax debate, the Legislature could see action today with a new tax offer that Assembly leaders hope to vote on today.

After receiving a plan that would tax businesses based on their payroll costs, Assembly Democrats worked with Sen. Mark Amodei, R-Carson City, until about midnight to come up with a counteroffer that both houses might accept.

Speaker Richard Perkins, D-Henderson, said this morning that while he negotiated the plan with Amodei, he has no idea how it will be received in the full Senate.

The Assembly Democrats planned to meet about noon today, with a possible floor session later. The Senate had yet to meet as of mid-morning.

"We've got a very short window today when we can vote and have all of our members here," Perkins said. "My preference would be to vote today, if for no other reason than we're spending $50,000 a day because a few holdouts don't want to fund education."

The Legislature needs a two-thirds majority to pass any new tax and has consistently been short of that in votes to pass a tax plan. The Senate and Assembly have discussed raising about $860 million in new taxes to fund the state budget.

After the Senate took the floor about 8 p.m. -- only to quickly adjourn -- Majority Leader Bill Raggio, R-Reno, reported that his caucus was prepared to support a new tax plan -- one centering on a payroll tax.

But Democrats have consistently declared no interest in such a tax, as Assembly Majority Leader Barbara Buckley, D-Las Vegas, repeated Tuesday: "It's not a broad-based business tax."

Raggio said he didn't think the payroll tax his caucus was proposing was "DOA" -- dead on arrival.

"Prospects of death on taxes change day to day," Raggio quipped.

Tuesday morning, the Senate appeared to be working on a capping amendment to the net profits tax -- a way to limit the amount of income a business would make subject to the tax.

By Tuesday afternoon, it was clear the only support from Senate Republicans was for a payroll tax. The proposal would tax employers for each employee's salary over $21,500.

The payroll tax would essentially replace the per-employee business license tax enacted in 1991. The plan would make up the loss of revenue from not including a net profits tax by increasing levies on cigarettes and liquor.

The payroll tax in the Senate's new proposal is exactly the same as the payroll tax previously considered, and rejected by the full Senate.

The plan would tax businesses on 1.25 percent of employees' salaries over $21,500.

The Senate plan includes the same mix of taxes previously included -- with the exception of the net profits tax. The elimination of the net profits tax and a reduction in the amount of revenue obtained from a real property transfer tax create the need to increase levies on cigarettes and liquor. The plan also includes the 0.10 percent live entertainment tax, a 0.50 increase in the gaming tax and increased levies on slot route operators and business filings with the secretary of state.

The Democrats' offer uses the payroll tax as an elimination of the business license tax.

The plan revolves around a 3 percent financial institutions tax and a franchise fee based upon a business' total revenue.

The fee is applied quarterly using a sliding scale of rates, which average at about 0.12 percent, depending upon a company's gross revenue. The first $100,000 of revenue is exempt and the rest is taxed depending on the amount.

A company at the high end, with $20 million in gross, would pay $28,000.

The franchise fee idea is an offshoot of the gross revenue portion of the plan economist Jeremy Aguero proposed last week.

The franchise fee and financial institutions tax would take effect in the 2005 fiscal year, raising about $140 million. When fully implemented, the bank and franchise taxes would generate $300 million a year.

Perkins said he didn't know how the Senate would react to that.

"A franchise fee will probably fly as well as an employer tax is going to fly over here," Perkins admitted.

The Assembly plan does not include a 1 percent room tax, and includes different levies on cigarettes, liquor and live entertainment.

The Senate proposed a 35 cent increase in cigarettes to the Assembly's 50-cent hike. The Senate's liquor tax was a 50 percent increase, while the Assembly increased the tax by 75 percent.

The Senate's live entertainment tax is a strict 0.10 percent levy on admissions, food and beverages at live events. The Assembly amended the tax to specify that only arenas with fewer than 5,000 seats must pay the tax on food and beverages.

Larger arenas, like the Thomas & Mack Center, the MGM Grand Garden Arena and the Las Vegas Motor Speedway, already pay sales tax on food and beverages.

The idea of the 5,000 seat cap is to exempt the larger arenas from paying the 0.10 percent on food and beverages. Those arenas would still be subject to the live entertainment tax for admissions.

The latest plans came after a day of waiting in the Legislature. The Senate convened only to recess into caucus and then adjourn.

"This is a disaster," an administration official said. "They were supposed to get done in 120 days and now 10 days after that they're starting from scratch and asking how the budget works."

The Legislature adjourned the regular session June 2 without even taking a vote on taxes. Guinn convened lawmakers in a special session June 3, but originally set a June 6 deadline for agreement on an $860 million tax plan and the K-12 education budget.

The June 6 deadline was extended to June 8, but when both the Assembly and Senate voted down tax packages on June 7, Guinn removed the time deadline from his proclamation and encouraged the Legislature to reach agreement.

Now lawmakers are looking at a different kind of deadline -- the end of the fiscal year June 30.

Michael Hillerby, Guinn's deputy chief of staff, said that while the state will have revenues coming in July 1, state law prohibits any of the money to be disbursed to uses the Legislature did not authorize by appropriation acts.

The Distributive School Account and a class-size reduction bill are for a combined $1.9 billion. The $860 million in new taxes is the amount needed to make up the difference between the state's revenues and the spending needs.

"Some of the money will be there, but they can't spend it," Hillerby said. "One of the biggest problems for the schools is that they can't hire teachers. They cannot sign contracts to obligate money they don't have and if this isn't resolved soon, that pool of qualified applicants will not be there."

Assembly Republicans continue to want the governor re-open the state's regular budget, the one governing higher education and state government operations.

Guinn has said repeatedly he will not allow Assembly Republicans to re-open the budget bill. The bill was approved by 71 percent of lawmakers and already signed into law.

Perkins said the longer the special session drags on, the harder it will be to keep lawmakers in Carson City.

"The younger members have to get back to jobs, back to families, and particularly in my caucus, where there is support for taxes, they're getting frustrated at a handful of people who have kept us here for no other purpose than political gamesmanship," Perkins said.

Assembly Minority Leader Lynn Hettrick, R-Gardnerville, said the 15 members of his caucus who are opposed to the tax plan want the $860 million total reduced.

"We've said that consistently," Hettrick said. "That's not new for the special session."

Perkins said the price of the special session, which now costs $30,000 to $50,000 a day, is making it important to finish negotiations.

"We have to decide if we're wasting taxpayer dollars because some people won't support increasing revenues," Perkins said.

Amodei said he would prefer lawmakers to cancel their vacations -- like the one to Spain that Senate Minority Leader Dina Titus, D-Las Vegas, has planned for Thursday.

"When you're talking about an almost $870 million tax plan, it's better to spend a few thousands of dollars thinking of the best way to do it," Amodei said.

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