Get your calculators, businesses
November 15, 2002
If they haven’t already done so, every business in Nevada should be calculating just how much a quarter-percent gross receipts tax will cost them.
That way they’ll know whether the tax is a good idea, or not.
Let’s start with a few givens:
— We don’t want any tax increases.
— Unfortunately, that’s probably not going to be one of the options when Gov. Kenny Guinn submits his budget to the Legislature.
— A tax on business income is more politically palatable than a tax on personal income.
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With that said, perhaps the best way for a business to measure the gross receipts tax proposal is to compare it with the teacher union’s proposal two years ago. Both taxes are in the same ballpark when it comes to providing revenue for the state.
The difference for businesses is in taxing gross or net income.
The teachers suggested a 4 percent tax on businesses’ net income. The governor’s task force is recommending a tax of one-quarter of 1 percent on gross revenue. It would affect only businesses grossing more than $350,000 a year.
Part of the proposal is to raise the business license fees from $100 per employee per year to $140 per employee per year. But businesses paying the gross receipts tax would get a credit of $100 per employee a year.
At the Nevada Appeal, when we did the math for our own business, the gross receipts tax was significantly lower than a net income tax. But that’s not going to be true for businesses that generate huge gross revenues — such as supermarkets — and operate on small net margins.
Keep in mind that casinos, which are the state’s biggest industry and which generate obscenely large amounts of gross revenue every day, already pay a 6-1/4 percent tax on their gross receipts.
So is a gross receipts tax (along with a smorgasboard of other taxes aimed at other segments of the economy) the best way to go?
At this point, we can say this: The governor’s task force put an exhaustive amount of research into the issue. The numbers are there to back it up.
Also, the Legislature will get a chance to tinker. For example, should a business get more credits per employee if it provides a health-benefits plan? (We’d give that idea a definite thumbs-up.)
Ultimately, it will be your own calculator that will give you the answer.