Democrats’ plan calls for $175 rebate

Kirsten Searer

Friday, May 13, 2005 | 11:09 a.m.

CARSON CITY -- How does a $175 check sound?

Pretty good to Assembly Democrats, who announced a new plan Thursday to rebate $300 million by sending checks to each Nevadan 18 and older with a driver's license or identification card from the DMV.

They call it a gasoline tax rebate.

"Since gasoline is such a high price right now, we thought the gasoline tax rebate would be very appealing to our citizens and help reduce that burden," Assembly Speaker Richard Perkins, D-Henderson, said.

Everyone in the legislative halls has an opinion on how to rebate the $300 million that Gov. Kenny Guinn said must go back to taxpayers in the next budget. Senate Majority Leader Bill Raggio, R-Reno, joked Thursday that somebody will soon propose dumping a pile of cash out of an airplane.

The Democratic plan announced Thursday is similar to a plan floated earlier this week by Senate Minority Leader Dina Titus, D-Las Vegas.

Titus suggested giving all Nevadans with a driver's license or identification card a $150 rebate, probably through the insurance premium tax.

"You can call it whatever you want to," Titus said. "It's the exact same plan I put out a week ago, so great, I'm glad they're on board."

The plan differs from Republican incarnations that would rebate or give a credit for vehicle registrations.

Guinn said earlier this year he wants to rebate vehicle registrations, which would amount to anything from $40 to $300, depending on the value of each car.

The idea received a relatively cool reception in the Legislature from its beginning. And this week Democrats said Nevadans would have to return all of the rebates to the IRS if people itemized their vehicle fees on federal tax forms.

That's the beauty of the gasoline tax rebate -- few people deduct their gasoline tax on their federal forms, Perkins said.

But some, including Guinn and Assembly Minority Leader Lynn Hettrick, R-Gardnerville, worry that Democrats might be pulling fancy accounting.

The money will not come from the gasoline tax coffers, which fund state highway maintenance and improvements. Instead, it will come from the $600 million surplus in the general fund.

Democrats chose the gas tax because they need to rebate a specific tax, said Assembly Majority Leader Barbara Buckley, D-Las Vegas. A blanket check from the state could be considered income and also be taxable, she said.

Democrats acknowledged they simply needed a vehicle to give people money without having the IRS go after it. Gas taxes, they said, seemed like the best option.

Sen. Bob Beers, R-Las Vegas, still maintains there is a way to rebate money through vehicle registrations and avoid taxes by giving people a credit toward their 2006 registrations.

It would also be more fair and keep administrative expenses down, Beers said.

"It's wasteful to mail out a check," he said.

Guinn expressed concern Thursday that the state might not be able to prepare to give credits until 2007.

He said he's looking for a plan that's more immediate, and still believes his original plan can be worked out with the IRS. And he said he does not believe that the entire vehicle registration rebate would be taxable.

"To the best of my knowledge -- and we checked on this today -- they haven't talked to anybody in the IRS," Guinn said.

Perkins and Buckley said they have worked with their legal staff and a tax professor at the Boyd School of Law on the tax issues. But Perkins said he hasn't received official clearance from the IRS that the gas tax rebate would not be taxable.

"I don't think we need one," he said.

Guinn said that makes him worried about the Democrats' entire plan.

"We're concerned that somebody is giving them advice that says anybody who would do our plan would have to give back all their money," Guinn said. "I don't think anybody can show me how that works."

Guinn said he thinks people who itemize the tax would have to pay a tax of about 15 percent on the rebate.

He also said his plan would rebate more to people and businesses that have paid more into the system with multiple or expensive cars.

Perkins responded there's too broad of an array of taxes to determine how much each person paid into the system -- including gas taxes, vehicle services taxes, sales taxes and property taxes.

"There's no way to determine that with any specificity," Perkins said. "This is an equal share for all Nevadans."

When asked if businesses deserve a better tax break, Perkins said Republicans are turning an argument they used in the 2003 session, when they said that adding business taxes will ultimately hurt people.

"During that entire debate from last session, what we heard from business is that businesses don't pay taxes, people pay taxes," Perkins said. "If there's a business tax they pass it on to the consumer. What we're doing is putting the rebate into the hands of taxpayers."

Buckley said all of the plans have similarities, it was just a matter of creating a structure that is legally sound and gives everyone a check.

Raggio said he's not ready to comment on the proposals yet, and will wait to see how the budget plays out before committing to any rebate.

The state gasoline tax is 18.5 cents per gallon, and counties are allowed to levy up to another 9 cents per gallon. The tax generated $184.5 million in the fiscal year that ended last June.