Banks plan course of action against newest state taxes

Kevin Rademacher

Monday, Jan. 24, 2005 | 10:35 a.m.

With just weeks to go before state lawmakers converge on Carson City, Nevada's bankers are finalizing their strategy for the new legislative session.

That strategy appears to be a singular focus on finding the sympathetic votes needed to challenge the bank-specific taxes levied in 2003.

Banks are currently paying a $7,000 annual per-branch excise fee and a 2 percent payroll tax. No other industry has been saddled with a branch fee, and other businesses now pay a 0.65 percent payroll tax.

Bankers have apparently found an ally in Assemblyman John Marvel, R-Battle Mountain. Marvel's plan would repeal the excise fee and roll back the bank payroll tax to match other industries.

"It's just to put the banks back on an even playing field," said Marvel, who didn't like the taxes when they were handed in 2003. At that time, however, he said extending the session -- which stretched into two special sessions amid heated debate -- to continue the fight could have made matters worse.

"I though it was unfair at the last session," Marvel said. "But the longer we stayed the worse the bill got. All I'm trying to do now is fix it."

The bankers' effort will be led by a new face this year. Veteran lobbyist Bill Uffelman was named president of the Nevada Bankers Association last year, replacing longtime NBA leader Ted Wehking, who retired in 2004.

Uffelman said improving economic conditions could make a tax reduction more palatable for the Legislature.

"The argument is a lot easier to make when we are looking at a $500 million surplus rather than a $500 million deficit," he said.

Repealing the excise tax, he said, would cost the state $1.6 million, and reducing the payroll tax would cost about $12 million.

Some proposals have been mentioned that would only ease the per-branch fee on community banks, exempting the first 10 branches. Uffelman, however, said such a move would merely increase the focus of an already unfair tax.

"The threshold of 10 banks would mean that, essentially, two banks are paying the entire fee," he said. "That truly is not fair."

Six banks in Clark County have more than 10 branches, with Bank of America and Wells Fargo the county's market leaders.

Uffelman pointed out that the number of branches is not always a good measure of size. Caliente-based Nevada Bank & Trust has five branches throughout rural eastern Nevada, but none of the branches are large.

Sen. Mike McGinness, R-Fallon, agreed. He said he will be seeking to turn back the bank taxes which he said could ultimately hurt the residents of the many rural communities he represents.

"A lot of the small community banks are having trouble expanding," he said.

McGinness said that for banks in some of the smaller communities the new taxes could be the difference between profitability and red ink. Should the taxes stay in place, it could mean fewer new banks in some small towns and the possibility of bank closures in others.

"That would be to the detriment of the community," he said.

Even if the banks didn't face closure, Marvel said the more money chewed up by taxes means more money taken out of the lending pool.

"Tax money to me is dead money," he said. "That's money that is not being lent to consumers."

Success, however, could hurt the case made by bankers. Throughout 2004, banks posted strong earnings in the state. Three new banks are now attempting to form in Clark County, and two existing local banks launched successful initial public stock offerings.

"It probably does make it harder," McGinness said. "But if the economy of the state wasn't as robust as it is, I think we would have probably been looking at bank closures."

Uffelman also pointed out that many fringe lenders -- such as pawn shops and payday loan stores -- will seek to be excluded from the new taxes in the upcoming Legislature. He said it is unclear how much of the $14 million financial institutions are paying in new taxes come from those alternative lenders. Uffelman did say, however, that if they are unfair for those operations, they should be seen as unfair for banks as well.

"If there is rationale for taking them out ... then, gee, we ought to be taken out, too," he said.