Businesses Support Alternative to Sandoval Tax Plan
By: Sean Whaley (Las Vegas Review Journal) April 2015
CARSON CITY — Officials representing some of Nevada’s major industries, from car dealers to retailers to manufacturers, sat at the witness table in the Assembly Taxation Committee hearing room Tuesday to support an alternative tax measure to fund Gov. Brian Sandoval’s plan to improve public education.
The support came for Assembly Bill 464, a plan which would expand and increase Nevada’s existing modified business tax to raise about $544 million in new revenue to balance Sandoval’s $7.3 billion general fund budget. The tax would be paid by about 18,000 businesses from the 13,000 that pay payroll taxes currently.
The Assembly proposal is in contrast to Sandoval’s revenue plan, Senate Bill 252, which would instead seek a new business license fee to raise $250 million a year to fund his public education proposals. Sandoval also relies on an extension of other, expiring taxes to balance his budget.
The support for AB464 was countered, however, with opposition to the measure from the Nevada gaming industry, which argued that the proposal is not a broad enough levy to end the state’s historic reliance on a small number of Nevada employers to balance its budget.
The two measures are pitting major industries against one another even though there is general agreement on Sandoval’s spending plan.
The tax discussion won’t be resolved until much later in the session, which must end by June 1.
When the Assembly Taxation Committee reconvened after a break, the measure was pushed out of the committee to the Ways and Means Committee with no recommendation. The move keeps the measure alive with a Friday deadline looming for committee action on bills.
Wayne Frediani, executive director of the Nevada Franchised Auto Dealers Association, said the modest increase in the modified business tax from 1.17 percent to 1.56 percent in AB464, which includes some other modifications, wouldn’t result in layoffs. The association supports Sandoval’s proposed improvements to public education, he said.
Ray Bacon, executive director of the Nevada Manufacturers Association, and Paul Enos, chief executive officer of the Nevada Trucking Association, also supported the bill.
“We do agree that the governor’s education goals are laudable and we agree with those,” Enos said.
The modified business tax is broad-based and is easy to compute for business owners, he said. It is a true reflection of economic activity in the state, Enos said.
Bryan Wachter, director of public and government affairs for the Retail Association of Nevada, said revenue predictions based on the modified business tax are reliable. There is no revenue certainty guaranteed with the proposed business license fee, he said.
But Pete Ernaut, representing the Nevada Resort Association, said only a few thousand Nevada businesses pay the modified business tax. Sandoval’s plan would instead impose a broad-based tax on all 330,000 Nevada businesses, he said.
It is not fiscally prudent to continue the over-reliance on one industry, Ernaut said.
The gaming industry pays about 18 percent of the current modified business tax, he said. That percentage would increase to 26 percent under the Assembly tax proposal.
“This doesn’t work for us,” Ernaut said. “It requires a higher reliance on gaming.”
The Assembly proposal, presented by Majority Leader Paul Anderson and Taxation Chairman Derek Armstrong, both Republicans from Southern Nevada, would also require about 5,000 more businesses to pay the modified business tax by reducing the exemption to $50,000 in payroll per quarter from the current $87,500. It would also have all covered businesses, including financial institutions, pay the same rate. Financial institutions now pay a 2 percent rate.
Sandoval’s proposal, a new type of levy based on gross receipts, would establish a variable-fee plan. The smallest businesses would pay a flat, annual $200 fee. Others would pay much more based in part on the business category they are placed in.
The Assembly alternative, proposed by some moderate Republican lawmakers, would use the existing modified business tax to raise the additional revenue needed to balance Sandoval’s budget.
The business license fee currently at $200 a year for all businesses, would rise to $500 for corporations and $300 for noncorporate businesses. The tax plan would bring in $544 million in new revenue and would exceed Sandoval’s 2015-17 budget by just under $62 million.
