Net-profits tax from two years ago gaining favor
June 6, 2003
A tax plan similar to the net-profits tax proposed by Nevada teachers two years ago was presented to lawmakers Thursday.
The plan would generate up to $250 million a year and, with other revenue proposals generally supported by lawmakers, raise enough to cover the $860 million needed to balance the budget.
The 2001 Legislature refused to discuss a net-profits tax. Now, in the face of major opposition to nearly every other broad-based business tax proposal, a number of lawmakers are saying it doesn’t look that bad.
“This could be the basis of a compromise,” said Assemblywoman Sheila Leslie, D-Reno.
Chris Giunchigliani, D-Las Vegas, said she supported the idea two years ago and still thinks it’s a good one.
“It’s time to make some decisions. Net profits has been around. It’s in 47 states. Business is comfortable with it,” she said.
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Lawmakers need two-thirds of each house to pass a tax plan.
Senate Majority Leader Bill Raggio, R-Reno, said he and Speaker Richard Perkins, D-Henderson, asked lobbyists Sam McMullen representing business and Billy Vassiliadis representing gaming to try to hammer out an agreement based on a net-profits tax in hopes of avoiding another deadlock.
“We could sit here forever,” Raggio said. “The other house took the payroll tax off the table and we took the gross-receipts tax off the table, so we were heading for an impasse again.”
With the help of Jeremy Aguerro, analyst for the Governor’s Task Force on Tax Policy, they developed a tax of 3 percent of profits up to $50,000, 5 percent for profits up to $100,000 a year and 7 percent for all profits above that.
The maximum any business would have to pay is a quarter-percent of its gross receipts. The minimum was set by imposing a franchise fee on all businesses ranging from nothing for companies with less than $20,000 a year to $10,000 for those grossing more than $10 million.
Businesses paying industry-specific taxes, including gaming and insurance, would be exempted from double taxation on those parts of their business.
Aguerro said the franchise portion of the tax could be implemented quickly — generating up to $102 million. He said the net-profits portion of the plan would take a year or more to implement.
Assembly Minority Leader Lynn Hettrick, R-Gardnerville, said the plan would allow the biggest businesses to pay a lower percentage of their total than small businesses.
Sen. Bernice Mathews, D-Sparks, said she wouldn’t support the idea because it’s too complicated to absorb and understand with just one day to go in a special session of the Legislature, called after lawmakers failed to agree on a tax plan by Tuesday’s 1 a.m. deadline.
Assemblywoman Dawn Gibbons, R-Reno, made a similar comment but agreed to consider the proposal today.
Lawmakers must raise about $860 million in new revenues over the next two years to balance the budget they approved in the session’s waning minutes.
Both committees will take a thorough look at the proposal this morning — the day Gov. Kenny Guinn has set as the deadline for the special session to complete its work.
Beyond the net-profits tax, the Senate and Assembly agreed to reduce collection allowances cigarette, liquor and sales tax retailers get for collecting taxes. Together, those changes would raise about $25 million a year.
Both agreed to impose a 10 percent tax on live entertainment in the state, generating $47.9 million next year and more than $80 million a year once fully implemented.
They also agreed to a version of an annual business license fee — the Senate selecting $50 and raising about $12 million a year.
Both houses agreed cigarette and liquor taxes should increase.
For restricted slot machine fees, both houses approved a 33 percent increase to raise some $2.3 million a year.
The Senate and Assembly also agreed to a real-estate transfer tax recommended by Hettrick who said eliminating the proposed $100,000 exemption would simplify collections. He said the rate could be cut from $1.88 to $1.10 for every $500 of value and still more than double the amount of revenue to $50 million a year. He said the reason is the large number of property transfers and sales under $100,000 — many of them timeshares.
The subject of general gaming taxes and several other revenue sources are still on the table.