The Governor's Task Force on Tax Policy
in Nevada soon will produce a massive
report recommending taxes that will significantly
affect businesses.
The new initiatives are designed to rescue
the state from a growing revenue shortfall
that may be worse than earlier assumed,
according to work done by the task force's
technical working group. That group,
chaired by Jeremy Aguero, principal analyst
with Applied Analysis in Las Vegas, initially
projected a cumulative shortfall of $2.6
billion through 2011, based on inflation
and population growth. The task force then
asked the working group to develop a second
scenario, factoring in growing demand
for public services as well as an expected
drop in tourism and sales, and the results
ballooned to $4.6 billion.
"In my humble opinion, I'd go with
scenario two," said Aguero, when asked
which model was more realistic during
his presentation at the task force's meeting
last week. The task force's chairman,
Guy Hobbs, managing partner with
Hobbs, Ong & Associates Inc. in Las
Vegas, was quick to point out that the
numbers may change, for better or worse,
as new and better data is collected.
The task force plans to recommend a
host of tax reforms and enhancements, but
the primary one affecting businesses will
likely be a new 0.25 percent tax on businesses'
gross receipts coupled with a possible
increase in the so-called head tax the
business license tax, or BLT, that currently
requires businesses to pay $25 per employee
every quarter.
Hobbs suggested what he called a
blended tax, in which businesses that pay a
head tax would receive a one-to-one credit
to offset their gross receipts tax.
For example, if a company paid
$10,000 in annual BLT and was expected
to pay $20,000 in gross receipts tax, the
business would end up paying only
$10,000 in the gross receipts tax. In addition,
he suggested smaller businesses
those reporting gross receipts below a figure
somewhere between $150,000 and
$200,000 be exempt entirely from the
gross receipts tax. The task force also discussed
whether to impose a head tax on
all businesses, including sole proprietors
who are now excluded.
Hobbs said such a combination of gross
receipts tax and BLT would be more fair
than a head tax alone because it would tax
many large corporations specifically
banks and the Wal-Marts of the world
that make large sums of money in Nevada
with very little personnel.
The tax received the tacit approval of
the gaming industry. Task force member
Mike Sloan, senior vice president of
Mandalay Resorts Group, said the
Nevada Resorts Association, which represents
the $18 billion gaming industry,
agreed to endorse a gross receipts tax
that would affect both the industr's
gaming and non-gaming revenues.
The task force was still debating that
and other tax possibilities when it decid-
cided to reconvene in three weeks to
continue ironing out the details of its
proposal, which is due to the governor
and legislative counsel by Nov. 15.
But the consensus was that Nevada
businesses, which are now largely free of
taxes imposed by other states, should
start shouldering more of the tax burden.
"There has been quite a bit of discussion
about business and whether business is
paying their fair share," said Eva Garcia-
Mendoza, task force member and attorney
with Garcia-Mendoza & Snavely in
Las Vegas. The question, said Garcia-
Mendoza, is this: "How can we get that
fair share without penalizing small business
and at the same time keep Nevada
an attractive place to do business?"
The eight-member task force was
established last June by the Legislature
and asked to develop a long-term tax
policy that would broaden the state's
tax base.The group has met monthly since
December and received input from a
range of interested parties, including
state and local government and industry
groups such the Nevada Manufacturers
Association. But the task force's evolving
proposal is gleaned almost in its
entirety from a report prepared by the
Nevada Taxpayers Association, an 80-
year-old group representing businesses
in the state. The report was delivered to
the task force last month. The taxpayers
association, however, did
not propose, nor does it endorse,
the gross receipts tax.
According to the Assembly resolution
that established the task
force, the group is not supposed to
focus on industry-specific taxes.
Sen. Joseph M. Neal, however,
spoke to the task force last week
about raising the gaming tax rate
from its current rate of 6.25 percent
to 10.25 percent for the biggest
casinos. A recent Reno Gazette-
Journal/News 4 poll found that
two-thirds of voters wanted the
state to raise the gaming tax.
But the task force did not consider
the gaming tax during its discussion
of possible tax proposals.
And others, such as Danny
Thompson of Nevada's AFL-CIO
and Jan Gilbert, northern Nevada
coordinator of the Progressive
Leadership Alliance of Nevada, said
the gaming industry, which supplies
about a quarter of the state's tax revenues,
already pulls its weight.
Some of the most serious proposals
still are hotly debated. According to the
Assembly resolution establishing the task
force, the group should look at expanding
the state's diminishing sales tax.
A tax on services has been proposed
by many, including a tax on
services associated with tangible goods
suggested by the taxpayers association.
The task force, however, is currently
focused on another idea proffered by the
taxpayers association to create a transaction
tax on entertainment and amusements.
That proposition was sharply criticized
by several task force members as
too regressive -- that is it is more burdensome
on the poor than the rich. The
task force agreed, however, to continue to
look into it and to possibly create exemptions
that would make it fairer.
The other contested item was earmarking.
That's the practice of designating some
portion of a tax to a certain program, such
part of the liquor tax going to fund substance
abuse programs. Carol Vilardo, executive
director of the Nevada Taxpayers
Association, and Chairman Hobbs both
found fault with earmarking. But other task
force members, as well as Gilbert of
Progressive Leadership Alliance of Nevada
said earmarking is the only guarantee many
essential programs had of getting funding.
The task force is looking at acrossthe-
board tax increases. It discussed raising
the cigarette tax, which is currently
35 cents a pack, so it is at least as much
as the national average of 58 cents per
pack. Task force members are also considering
raising the liquor tax, which is
also below the national average.
The group may propose raising the
cap on property tax from $3.64 per $100
of assessed value to $4.04, but that, too,
was tabled until the group's next
meeting in early September.
