Gross receipts tax on the table

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.