Senator says state collecting too much in taxes

Saturday, Nov. 12, 2005 | 7:47 a.m.

CARSON CITY -- State Sen. Randolph Townsend, one of the major architects of 2003's $833.5 million tax increase, now believes that the state is collecting too much money -- and that business taxes should be reduced in 2007.

Based on current projections, Townsend, R-Reno, said Friday that the state could end up with as much as $500 million in excess revenue after taking care of budget needs.

Barring a major catastrophe, there should be tax reductions for businesses in 2007, he said.

"The revenue picture is showing that if we provide services at the same level -- and that includes raises for teachers and state workers and others -- we will still have an overabundance," Townsend said.

Townsend, who supports Rep. Jim Gibbons, R-Nev., for governor, said he has not talked with the candidate about possible tax reductions.

One possible tax reduction target, Townsend said, is the 0.7 percent tax that the 2003 Legislature imposed on gross wages, with exemptions for money paid for health benefits. The tax was lowered to 0.65 percent in 2004, and the 2005 Legislature reduced it to 0.63 percent.

The tax -- projected to bring in $235.7 million in state revenue next fiscal year -- might be capped or changed to cover net wages rather than gross salaries, Townsend said.

The 2003 Legislature also imposed a $100-a-year tax on all businesses. That tax, Townsend said, was not meant to be a revenue producer, but rather to track businesses to ensure they were also paying industrial insurance premiums and unemployment taxes.

The business license fee is predicted to bring in $23 million in the state's $3 billion budget next fiscal year.

If there is still a need to track business, Townsend said, the tax should be lowered to $25 once every five years.

The 2005 Legislature capped property tax at 8 percent for business and 3 percent for homeowners.

"We're collecting too much money," Townsend said earlier this week on "Nevada Newsmakers."

"It belongs to the public. We don't need to collect it and then send it back in a check. That doesn't make any sense. We just don't need to collect it in the first place."

His comment was a reference to the $300 million rebate to car owners and others earlier this month.

Lowering taxes usually results in more tax revenue, Townsend said Friday.

Underlying the proposal to cut taxes, he said, is a belief that more businesses will be leaving California because of the recent defeat of state spending initiatives. Nissan, for example, is moving to Tennessee, he said.

"We will start to see California businesses abandon and move into Nevada, Arizona and Utah, and that will generate additional revenues," he said.

Cy Ryan can be reached at (775) 687 5032 or cy@lasvegassun.com.