Buckley pitches new tax plan to bridge revenue gap

By David McGrath Schwartz

Thursday, May 14, 2009 | 2 a.m.

Assembly Speaker Barbara Buckley is proposing to cut the payroll tax for three-quarters of Nevada’s small businesses, while at least doubling it on the rest to raise hundreds of millions of dollars in new revenue.

Buckley said under the plan businesses with payrolls of less than $250,000 would see their modified business tax rate drop from 0.63 percent to 0.5 percent. Larger businesses would see their rate rise to between 1.26 percent and 2 percent, she said.

“If we’re considering raising more revenue, not only should we exempt small businesses from those increases, we should provide them some tax relief,” she said. “These are businesses that employ a handful of people. Raising taxes on them could be the difference between laying people off.”

Seventy-six percent of Nevada businesses would qualify for the lower modified business tax, which is based on businesses’ payrolls, according to data Buckley obtained from the Taxation Department.

The state faces a massive gap between spending approved by the Legislature for two years and revenue it expects to receive from existing taxes. Republicans have held firm that the tax hike be kept to less than $800 million. Although ideas about how to bridge that gap are constantly whispered in the halls of the Legislative Building, Buckley’s is the first firm proposal offered on the record by a legislator.

Even with the rate cut, doubling the modified business tax raises a significant amount of money.

At the current rate, the modified business tax is projected to generate $536 million over two years.

Reducing the rate for businesses with less than $250,000 in payroll would lower that amount by about $16 million over two years, Buckley said. The higher tax on businesses with bigger payrolls would more than make up for the lost revenue.

Buckley is considering a run for governor in 2010. Regardless of her proposal, opponents will likely pillory her for raising taxes during a historic recession. Her choice of $250,000 as the cutoff for the lower rate echoes President Barack Obama’s campaign promise to cut taxes for families that make less than $250,000 a year.

The idea to protect smaller businesses was, at least initially, warmly received by lobbyists representing business groups. The suggestion that the modified business tax on larger companies could more than triple to 2 percent was not.

“Any help for small businesses would be a good thing,” said Steve Hill, chairman of the Greater Las Vegas Chamber of Commerce. But “anything over doubling the modified business tax would be difficult for us to support.”

Tim Crowley, president of the Nevada Mining Association, said, “Protecting small businesses is the smart thing to do in this depressed economy.

“We expect the modified business tax to be part of the mix. We’re OK with it, depending on the rate. There are limits.”

Carole Vilardo, president of the Nevada Taxpayers Association, said taxes should be equitable for all businesses.

“We have never supported an industry-specific tax or one that tried to identify a specific group to be treated differently,” she said. “That’s not a principle of fair taxation.”

The Taxpayers Association, which holds a board vote before supporting any proposal, might support a proposal if all businesses are charged the lower rate for the first $250,000 in payroll, and then larger businesses pay the higher rate on payroll above that, she said.

“That would be equitable,” she said.