Nevada Legislature: Lawmakers review GOP plan to raise, broaden payroll tax
April 7, 2015
Lawmakers reviewed a Republican-backed tax plan that sponsors say is a simpler, more predictable and harder to skirt than Gov. Brian Sandoval's proposed overhaul of business license fees.
Republican Assemblyman Derek Armstrong and Majority Leader Paul Anderson are the architects of AB464, which was discussed in a hearing Tuesday and is part of a plan to raise slightly more than the $7.3 billion needed to pay for Sandoval's two-year budget.
The Assembly Republican plan would raise the rate of the Modified Business Tax from 1.17 percent to 1.56 percent for general businesses, and it would require companies that spend more than $50,000 in wages each quarter to pay it. That threshold is lower than existing law, which exempts businesses that pay less than $85,000 in a quarter, and it would add about 5,000 businesses to the taxpaying base.
Proponents include retailers, manufacturers and the trucking industry. Opponents include the powerful Nevada Resort Association, which argued the Modified Business Tax isn't broad enough because it covers less than 4 percent of the 330,000 business entities. The measure disproportionately hits labor-intensive companies such as casinos, and it continues the state's overreliance on the gambling industry, resort association lobbyist Pete Ernaut said.
Armstrong said there's no perfect tax and that his plan was not totally complete. But he added that he had "grave concerns" about Sandoval's plan because it bore some resemblance to the margins tax voters rejected in November.
Anderson said it's appropriate for businesses to be taxed on payroll because their employees directly benefit from a better school system, and he refuted the criticism that the Modified Business Tax creates a disincentive to hiring and growth.
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"It is irrelevant to the decision of whether or not to hire an employee," Anderson said. "It's no more relevant than the Social Security tax that I have to match as an employer. It's no more relevant than workers' comp."
Proponents also note that the Modified Business Tax is easy for businesses to calculate, and the revenue stream is predictable for the state. Supporters of Sandoval's plan have acknowledged that there's a 25 percent chance a restructured business-license fee would fail to meet goals for raising revenue.
While the Modified Business Tax is the central feature of the Assembly Republican plan, it also would raise the business-license fee to $500 a year for corporations and $300 for other businesses, up from a flat $200. It also eliminates a tax on bank branches, and it repeals a tax deduction businesses can claim for health insurance premiums.
The plan is one of three major tax bills moving through the Legislature. Sandoval's plan, SB252, is the furthest along in the process after receiving party-line approval in a Senate committee.