Thursday, November 21, 2002
Copyright © Las Vegas Review-Journal

Chamber favors some new taxes

But centerpiece gross receipts tax rejected

The Las Vegas Chamber of Commerce's decision to back some new business taxes, but not a controversial gross receipts tax, received mixed reactions Wednesday from business and political leaders.

The chamber announced Wednesday morning it will help lobby legislators in the 2003 session to adopt many of the new sales and use taxes proposed last week by the Governor's Task Force on Tax Policy to help offset a projected $700 million deficit in the state budget over the next two years.

The business group, however, turned thumbs down on the task force's centerpiece: the gross receipts tax.

"The gross receipts tax is regressive and unfair," said Kara Kelley, president of the chamber. "It disproportionately affects low-margin businesses and disregards a business' ability to pay.

"It's the one tax that has received the most visceral reaction from business owners. It's seen as punitive and unfair."

The gross receipts tax would collect one-quarter of a percent of a company's annual revenue, with exemptions up to $350,000.

Gov. Kenny Guinn Wednesday evening welcomed the chamber's decision.

Guinn said chamber officials talked to him earlier this week because they wanted to make sure he understood the group's 7,000 business members had concerns about the tax proposals.

"And I say, `That's perfectly legitimate.' They also fully understood the needs for the state, and that they would come up with something palatable for their members," Guinn said.

"People are at least talking and throwing out proposals. My job is to stay within the boundaries we've got to determine what we can do to provide the services we've been doing."

Jay Kornmayer, an executive with Wells Fargo Bank and chairman of the chamber's board, welcomed the chamber's decision as proof the business community recognizes it "must shoulder its share of state obligations, including the education of our children," which accounts for about 55 percent of the state budget.

"There's a huge burden the state bears for educating our kids, and we are underfunding our students vis-a-vis the national average," Kornmayer said.

Kornmayer said the chamber's 25-member board represents a diverse cross section of its membership, and that while the vote to support taxes other than gross receipts wasn't unanimous, it was an overwhelming majority.

Mike Sloan, vice president and general counsel of Mandalay Resort Group and a member of the task force, however, said he's not so sure the chamber's position truly represents its membership.

Sloan, who strongly advocated the gross receipts tax while on the task force, said the chamber's position was based on the results of a membership survey that only 10 percent of its members answered. Further, he said, 40 percent of those that responded were from businesses that would qualify for the $350,000 annual exemption, while another 10 percent represented members with fewer than 10 employees.

"Four years ago and again two years ago, the chamber opposed any real tax on business," he said, adding that the chamber's opposition to the gross receipts tax "doesn't surprise me. It doesn't represent a real cross section of Nevada business. It represents a group of people opposed to any taxes they may have to pay themselves."

"People are going to get the kind of government they want. If people in Nevada take the view they don't want more money spent on education, or mental health or basic services, then we don't have a fiscal crisis. We can just cut expenses. Nevadans already have settled for a level of government service below other states."

Several other gaming industry officials refused to comment Wednesday on the chamber's tax statement, although MGM Mirage's spokesman, Alan Feldman, referred questions to Bill Bible, president of the Nevada Resort Association.

Bible did not return a call Wednesday, but the association supported the gross receipts tax over raising homeowners' property taxes.

Instead of the gross receipts tax, the chamber's board said it believes the optimal choice for meeting the state's short-term revenue needs is increasing the business license tax, Kelley said.

Also known as the business activity tax, it raises the amount a company pays for each employee from $100 to $140 a year.

Other proposals backed by the chamber include expanding the sales tax base and raising property taxes, the admissions transaction tax and corporate filing fees.

Kelley said that while taxes need to be raised, the chamber will remain "fastidious" in its aggressive review of government spending and prioritization.

"Government savings through spending restraint, increased efficiency and privatization can still be realized," she said.

Guinn said there is little else to be cut in the state's budget.

"When people say start cutting, do you start cutting K-12 education? Nobody's going to cut Medicaid. You don't cut out of the highway patrol or Department of Transportation," Guinn said. "We look at them every day. If you know of an area, whether you're a citizen or a legislator, tell us what they are."

Guinn said there was $543 million of new money coming into the state's general fund in 1997, the last term for Gov. Bob Miller.

That dwindled to $378 million in 1999 after Guinn had taken office and to $278 million in the 2001 legislative session.

Without any tax increases, there will be zero new money in the fund this year, he said. Meanwhile, the state's population has grown by about 350,000 over that five-year span.

"It's obvious it's going to require a basket of tax increases if in fact the budget is in trouble, and there's no reason to doubt that it isn't," said John Restrepo, principal of Restrepo Consulting Group and a chamber member.

"The question is how to solve it, what are the basket of taxes, without having a negative impact on residents or economic diversification. I voted against gross receipts. I don't know if enough research has been done to look at all the economic impacts to the state. I think it's a complicated tax to enforce and you'll have to set up a bureaucracy to enforce it."

If the other taxes fail to raise sufficient revenue, Kelley said the chamber will urge the Legislature to expand the sales and use tax base, which includes getting rid of exemptions.

"Currently, Nevada has one of the narrowest sales tax bases in the country," she said. "It is further eroding through Internet retail competition and shift in consumer expenditures from the purchase of goods to the purchase of services."

Kelley explained that expansion of the sales tax base would provide needed stability and offer an opportunity to decrease the overall burden by lowering the sales tax rate.

The chamber will continue to evaluate other proposals as they are presented, but will be advocating its outlined positions in Carson City, Kelley said.

Guinn said he's heard arguments that new taxes will hurt Nevada's efforts to attract new business, that the state has always been known for its low-tax business environment.

"The city and county raise taxes every year to meet their budgets and we're still getting people to come here," he said. "It will hurt you worse if we don't raise taxes to serve these 20,000 to 25,000 new students coming here over the next two years, times $3,800 a student."

Gaming Wire writer Rod Smith contributed to this report.