Costs of tax plan scrutinized

How much will it cost to implement Gov.

Kenny Guinn's tax proposal? That will be the question the Nevada Senate and Assembly taxation committees will be attempting to answer this week.

The two committees will be meeting jointly through out the legislative session to scrutinize the governor's proposal and to hammer out a solution to the state's growing budget deficit.

This Thursday the committees are scheduled to hear testimony from Barbara Smith Campbell, chairman, Nevada Tax Commission; Charles Chinnock, executive director, Nevada Department of Taxation; and Robert Shriver, executive director, Commission on Economic Development.

"I will be giving them an overview of the department and how we operate," said Chinnock.

"And the time frames and costs and implementations of the governors' proposal." The governor's tax proposal is based on an enormous report produced late last year by the Governor's Task Force on Tax Policy, an eight-member panel made up primarily of business people.

The governor's proposal includes a range of taxes, including increases in existing taxes and two new taxes, which would require new forms, software and personnel training to be put into action.

But Chinnock said the new taxes are not necessarily the most costly for the department to implement.

The gross receipts tax, for example, if enacted this legislative session would not take effect for two years.

The cost of implementing it then, said Chinnock, would be spread out over that period.

What could prove to be more costly for the department is the addition of a new tax group, said Chinnock.

"Sole proprietors would add substantial accounts to the workload," said Chinnock.

The governor's proposal includes adding sole proprietors to the list of businesses that pay the existing business license tax.

The new taxes, though, are the most controversial portion of the governor's plan and will be the subject of much debate in the legislature, inside and outside the committees' meeting room.

The tax drawing the most attention is the gross receipts tax - a 0.25 percent tax on all businesses' revenues above $450,000.

The governor, during his State of the State speech last month, outlined those details of the tax.

But the task force recommended that those businesses paying the gross receipts tax be given a one-forone credit for the BLT, the so-called head tax which is now $100 per employee annually.

(The governor's plan is to increase that tax to $300 per employee until the gross receipts takes effect, when it drops back to $140 per employee.) It's unclear if the governor's plan calls for a one-to-one BLT credit or a partial credit.

That, and other questions, should be cleared up next Tuesday when Michael Hillerby, deputy chief of staff, the governor's office, testifies before the committees.

The other proposed new tax, which has attracted its share of critics too, is the admissions and amusements tax - a 7.3 percent tax on non-participatory entertainment such as movies.

The gross receipts tax, in particular, has drawn the ire of many of the business community who says it is unfair because it is not based on a businesses ability to pay.

But it has been endorsed by the Nevada Resort Association, the group that represents the gaming industry.

Others in the business community suggested the state expand its sales tax to include services.

In the end, the governor's task force did not recommend that although the group did suggest that the state continue to look at ways to expand the sales tax base.

While the cost to implement a new gross receipts tax is still unknown, it is easy to administer and enforce once it is instituted, according to the task force.

But the state's tax department may already be strapped.

"The department of taxation is heavily challenged, to say the least," said Guy Hobbs, managing partner, Hobbs, Ong & Associates Inc.

in Las Vegas, and chairman of the governor's tax policy task force, testifying before the Senate and Assembly Committees on Taxation last week.

In two meetings last week, Hobbs and Jeremy Aguero, principal analyst, Applied Analysis in Las Vegas, and head of the task force's technical working group, outlined the task force's findings.

On Tuesday, the pair described to the committees how the task force arrived at the amount of the state's budget shortfall - estimated by the group to be $705 million for the next biennium.

On Thursday, they outlined the details of the task force's recommendation to raise cigarette, liquor and property taxes as well as launch a gross receipts and amusements tax.

"It's clear there is no silver bullet," said Hobbs.

"We need a blended solution." That's what the two committees will be trying to figure out during the session.

The Assembly Taxation Committee members are David Parks (R-Clark County), chair; David Goldwater (DClark County) vice chair; Bernie Anderson (D-Washoe County); Morse Arberry (D-Clark County); Kathy McClain (D-Clark County); Harry Mortenson (D-Clark County); Peggy Pierce (D-Clark County); Dawn Gibbons (R-Washoe County); Tom Grady (RLyon, Storey Counties area); Josh Griffin (R-Clark County); Lynn Hettrick (RDouglas County, and portions of Carson City and Washoe County); John Marvel (R-portions of Humboldt, Lander and Washoe Counties).

The Senate Taxation Committee comprises Mike McGinness R-Central Nevada), chair; Dean Rhoads (RNorthern Nevada), vice chair; Randolph Townsend (R-Washoe County, Carson City); Ann O'Connell (R-Clark County); Sandra Tiffany (R-Clark County); Joseph Neal (R-Clark County); Bob Coffin (D Clark County).