Tax committee hears complaints

Wednesday, Jan. 28, 2004 | 11:10 a.m.

CARSON CITY -- Bankers, hula dancers, artists and exhibitors at craft shows are all complaining they have been hit hard by the new $833 million tax package enacted by the 2003 Legislature.

Representatives of these groups told the Legislative Committee on Taxation on Tuesday that the taxes are hurting their businesses and the law should be changed by the 2005 Legislature.

The committee was also told that the amount of money that will be raised by the new taxes remains uncertain and is falling short of predictions in some cases.

For Summer Deu, a hula dancer in Las Vegas, however, the main issue was how one of the new taxes is making it hard for her to earn money. She told the committee that many small restaurants do not want to hire entertainers because of the new 10 percent live entertainment tax. This is eliminating jobs for entertainers, she said.

She said her hula-dancing sister had gone overseas to find work.

Luke Puschnig, legal counsel for the Las Vegas Convention and Visitors Authority, said the new tax law has resulted in a $100 registration fee for exhibitors at crafts shows, so some of them are no longer coming to Las Vegas. He said the Harvest Festival and other crafts shows may be driven out because of this $100 fee.

These people, Puschnig said, are here for only a few days. And he said this could hurt art shows such as those in Boulder City where a person comes in and sells his or her paintings or sculptures.

Under the old law, the convention center was able to pay $5,000 annually to cover the former $100 per head tax. But there is no exemption in the new law.

Sen. Mike McGinness, R-Fallon, acting chairman of the committee, said this tax could apply to those people who sell merchandise at home shows. Exhibitors at these shows, often held in convention centers, display for sale new items for homes such as hot tubs, electronic goods or cabanas.

Assembly Minority Leader Lynn Hettrick, R-Minden, said the $100 registration fee on these merchants who may come into the state for only a few days was "an unintended consequence" of a tax plan that was hastily drawn. "It needs to be fixed," he said.

Reiterating previous complaints from his industry, John Sande III, a Reno lawyer representing the Nevada Bankers Association, said the $1,750 tax on each branch bank each quarter is going to cause trouble in rural communities.

"The branch tax makes it difficult to survive in small communities," he said. "If a branch closes (in a small community), it will never reopen,"

Chuck Chinnock, executive director of the state Department of Taxation, said so far there have not been any lawsuits filed or payments under protest against the taxes. But the first payments of the modified business tax and the live entertainment tax are just starting to come in.

Carole Vilardo, executive director of the Nevada Taxpayers Association, told the committee there's been confusion and problems surrounding the new taxes. For instance, she said one man who has 20 businesses has had to register 20 times for which he had to pay $2,000.

She said "credit repair and collection agencies" have been designated as financial institutions and will have to pay the 2 percent tax on payroll rather than general business that is assessed 0.7 percent.

"That was not intended," she said.

Vilardo recommended the lawmakers change the law in 2005 to impose the tax on taxable wages, rather than on gross wages. She said that would be in line with the economic development policies of drawing companies with high-paying paying jobs to the state.

But Senate Majority Leader Bill Raggio, R-Reno, said that shifting the levy to taxable wages would require an increase in the tax rate to be raised to make up for lost revenue.

Vilardo agreed the rate would have to be higher but, she suggested, there could be exemptions for the smaller employer.

While Vilardo and others didn't like many parts of the tax package, they applauded the work of the state Tax Department and the Tax Commission in drawing up the regulations to enforce the new law.

Ray Bacon, director of the Nevada Manufacturers Association, told the commission that the health care deduction should be simplified. Businesses could then deduct what they pay in health expenses from their payroll tax.

Bacon said there are different types of health coverage including self-insurance, Taft-Hartley labor union insurance packages and a business buying a policy from an insurance agent. He said the state should accept what the companies report on their federal income tax for health care.

The committee also was told that it was too early to tell whether the tax increase will produce the revenue needed to balance the budget.

The first collections on the payroll tax and the live entertainment tax are not due until the end of this month.

Ted Zuend, deputy legislative fiscal analyst, said revenue from the gaming tax has been coming in at an 18.5 percent clip for the six months of this fiscal year. The prediction called for a 14.5 percent. But he said this figure could be misleading.

He said the amount won by casinos is up only 2 percent. Some of the tax money may be coming from markers that are paid from the past and from up-front payment of taxes. "It's uncertain if 14.2 percent is doable."

He said the proceeds from the live entertainment tax were projected to go up 67 percent. But so far they are up only 16.4 percent. "It's very uncertain if we can reach 67 percent," this fiscal year, said Zuend.

Sales tax is coming in at an 11.2 percent increase with the estimate at only 5 percent. But cigarette tax collections are rising 114 percent this fiscal year and they were expected to jump 144 percent with the increased tax.