Legislative panel hears testimony on bank tax

Thursday, May 27, 2004 | 11:09 a.m.

CARSON CITY -- Two bankers told a legislative committee Wednesday that the 2003 tax on the banking industry was punitive and the industry is paying more than its fair share compared to others.

Mark Daigle of Colonial Bank and Barry Smith of Nevada Bank and Trust Co. said the 2005 Legislature should level the playing field.

"We're looking for parity," Smith told the Legislative Committee on Taxation, Public Revenue and Tax Policy.

The committee, headed by Sen. Mike McGinness, R-Fallon, heard a host of suggestions for correcting the problems in the 2003 law, closing loopholes or granting further exemptions.

The committee will meet July 14 to make its recommendations to the 2005 Legislature.

Daigle said banks pay three times the rate of other taxpayers. The new tax imposed a 2 percent rate on payroll for financial institutions compared to the 0.7 percent now levied on other businesses.

In addition, a bank must pay $7,000 a year on each branch.

In surrounding states, Daigle said the corporate income tax rates are the same for banks and regular businesses.

In Nevada, he said the average wage was $33,122 but banks pay $42,000. That means there's a higher base on which to tax. The average business, he said would pay $215 per employee compared to $845 for banks workers.

This makes it difficult to compete with other industries for high tech employees. Daigle and Smith both noted financial institutions were the only ones singled out for a branch tax.

Smith said his bank, with headquarters in Caliente, has seven branches in other small towns. It paid $65,000 additional tax. One of his branch banks is in the red and another one is close to it.

"There are no other tax on locations," he said. "It's not a realistic tax."

Under questioning from Assembly Minority Leader Lynn Hettrick, R-Minden, Smith said his two branches would be in the black if the tax was rolled back.

While Nevada bankers have nearly unanimously condemned the tax, banks nevertheless have been moving ahead with rapid expansion plans in Nevada.

Bank of America recently announced plans to build 19 new Las Vegas branches over the next two years. George Smith, president of Bank of America's Nevada operations, said recently that those plans are moving forward despite the new taxes.

Late last year, U.S. Bank opened five new in-store branches in Las Vegas and added two more early this year. Again, those expansion plans were unaffected by new taxes.

Similarly, Wells Fargo Bank and Nevada State Bank -- as well as several community banks -- have indicated ongoing expansion efforts will continue.

The committee is considering a suggestion to adjust the branch bank tax. And it is looking at eliminating collection agencies from paying the tax assessed against financial institutions.

Carole Vilardo, executive director of the Nevada Taxpayers Association, suggested a change in the law that now requires each exhibitor at a trade show, exhibition and craft show to obtain a business license and pay the $100 fee.

The Las Vegas Convention and Visitor believes such events as the Harvest Festival and craft shows might be driven out of Nevada because of the impact.

Vilardo also suggested changing the law so that the railroad industry would be taxed. Under the law, a company that pays unemployment insurance premiums is required to pay the business payroll tax. But the railroads are exempt under federal law from the unemployment insurance premiums so they have escaped the tax.

Joe Guild, a lobbyist for the railroads, said at a previous hearing, that he didn't discover until after the tax bill was approved last year that the railroads were inadvertently left out of being hit with the payroll tax.

There were also suggestions that the business tax now computed against gross wages be changed to against taxable wages, a lower figure and that there be expanded deductions for health insurance coverage.

After the July 14 meeting, the committee will wrap up its business Aug. 24.

The Sun's

Kevin Rademacher contributed to this report.