Business leaders oppose governor’s tax plan

Erin Neff

Friday, March 7, 2003 | 11:20 a.m.

CARSON CITY -- Business leaders and tax advocates told two legislative committees Thursday that they do not support Gov. Kenny Guinn's plan to raise $77 million in emergency taxes.

Lobbyists moved between different rooms two stories apart to address Guinn's proposed increases in business license, cigarette, liquor and slot route taxes before the Assembly and Senate taxation committees.

But they had familiar comments in each room, as lobbyist after lobbyist said "No" in carefully guarded words.

"We're actually not here saying 'no, no, no,' " said Sam McMullen, the lead lobbyist for a group of business entities calling itself the Business Representatives Group.

But McMullen said businesses cannot support Guinn's plan to triple the business license tax -- even if it is only for three months.

"All we ever thought we were comfortable with was a 100 percent increase," McMullen said.

The current $100 a year business tax would be tripled under Guinn's bill, requiring $75 per full-time employee, or a $50 increase.

The Reno-Sparks and Carson City chambers of commerce said they opposed the temporary tax on business.

Others, like Mary Lau, executive director of the Retail Association of Nevada, opposed the entire concept of Guinn's "bridge" taxes. The $77 million would be applied to the current fiscal year ending June 30 and would be separate from the $984 million in taxes sought for the 2004-05 biennium.

Carole Vilardo, president of the Nevada Taxpayers Association, expressed concerns with each of the proposed taxes, and urged lawmakers to consider other options before passing new taxes to take effect April 1.

"I think we have an obligation to use the rainy day fund before we go raising taxes," Vilardo said.

Mike Zunini, who runs 33 Winner's Corner convenience stores in northern and rural Nevada, said he would be hit very hard by the temporary taxes.

Roughly 50 percent of his convenience store revenues are from cigarette and beer sales. Zunini has roughly 350 employees subject to the increased business license tax and would pay the 33 percent increase in the slot route operator tax.

"It's going to hit us very hard," Zunini said.

Peter Krueger, lobbyist for the Nevada Petroleum Marketers and Convenience Store Association, warned the taxes would be devastating in rural Nevada.

"In the marginal stores, it makes continuing operation questionable," Krueger said.

Assemblyman Tom Grady, R-Yerington, worried that the Winner's Corner in his district might have to close. He also said it is the only 24-hour gas outlet between Yerington, Tonopah and Carson City.

"It has a double whammy in the rural areas," Grady said of the tax plan.

Although many lawmakers support raising cigarette and liquor taxes, questions about the cigarette tax continue to erode that support.

In the Senate hearing, Ann O'Connell, R-Las Vegas, said lawmakers would have to be very careful with their tobacco policy decisions because of the impact those could have on tax revenue.

In addition to Guinn's proposed $.70 increase on a pack of cigarettes, lawmakers are considering banning cigarette smoking in grocery stores, convenience stores, schools and other public areas.

Vilardo said that the last time Nevada raised its cigarette tax -- back in 1989 -- it took the state two years to recover a decline in revenue. She also warned that smokers will flee to Internet sales to avoid the higher taxes.

Guinn's staffers made the rounds and his wife, Dema, and sister, Shirley Barber, watched the proceedings in the Assembly committee.

The few people testifying in support of the governor's emergency taxes were representatives of health or women's groups who supported raising the cigarette tax to curtail smoking.

Buffy Martin of the American Cancer Society said that while fewer people may buy cigarettes, the increased cost will make up for any loss in revenue.

"We don' think you can go beyond (a) 35 cents (increase) without feeling the law on diminishing returns," Lau countered.

Jim Avance, a former Gaming Control Board chairman and current lobbyist for the slot route operators' Nevada Retail Gaming Association, said he hoped lawmakers would decrease the amount of the 33 percent spike in slot route taxes.

He did pledge to be part of a solution, but warned: "All of the reasons the governor says the state needs money, is also happening to business."

Lawmakers on each committee appear unlikely to process Guinn's emergency tax measures. While the bill can clear committee with a simple majority, it requires two-thirds majority in either house for passage.

Assembly Taxation Chairman David Parks, D-Las Vegas, said he did not think he would schedule another hearing on the measure anytime soon.

"There's very little support for the bill," Parks said. "Let's hold off until we see what the administration really wants."

Guinn's staff introduced a bill Thursday that would tap $100 million from the so-called rainy day fund due to fears the state will be unable to balance its budget at the end of the fiscal year.

The state does not currently have a deficit, but Guinn's staff warns revenues could come in below expectations as they have for the first six months of the fiscal year. The administration also warns that a war with Iraq could impact the state's tourist-based economy.

Assemblyman Morse Arberry, D-Las Vegas, has scheduled a hearing on the rainy day fund transfer for next Wednesday in the Ways and Means Committee.

Some lawmakers favor taking all of the $136 million rainy day fund before any taxes are raised. Guinn's staff has argued that there needs to be money left in case there is a bad forest fire season, a downturn in the economy or other state emergency.