Friday, May 16, 2003
Copyright © Las Vegas Review-Journal

$730 million tax increase advances in state Senate

CARSON CITY -- After more than three months of discussions, the Senate Taxation Committee on Thursday approved increasing taxes by more than $730 million over the next two years.

These taxes include assessing a 1 percent tax on most services, even haircuts and auto repairs, starting in January 2005. But the panel rejected Gov. Kenny Guinn's plan to levy a 0.25 percent tax on the gross revenue of all businesses that same year.

Under the bill, property taxes would be increased by 33 cents per $100 assessed value starting in July. But the first $200,000 value of a home or other property would be exempt. Homebuilder representatives said the average home in Nevada is worth $189,000, so only wealthier people would pay the tax.

The vote is the first on major tax proposals this legislative session, which is scheduled to adjourn June 2. Veteran observers maintain an agreement on the $4.8 billion proposed budget and tax increases must come by next week for legislators to complete business on time. The logistics of writing bills, making amendments and conducting final votes takes about 10 days.

Almost immediately, it became obvious that the committee's vote to levy a 1 percent tax on virtually all services faces a major obstacle.

Earlier in the day, Gov. Kenny Guinn vowed to veto any plan if it targets services used by average people.

"I am open to what comes to me but for one thing, I am not going to accept any agreement if there is a sales tax on services," he said.

The governor explained he might back a service tax on "high-end" items, but not one "that is directed to every individual in the state."

Assembly Speaker Richard Perkins, D-Henderson, was pleased the committee began acting on tax proposals, but the service tax is not something he and most members of the Assembly will support.

"To me it is taxing the little guy, not big business," Perkins said.

He added he is not "stuck on a gross receipts tax," but the Legislature needs to approve a tax on big business.

But Senate Taxation Chairman Mike McGinness, R-Fallon, noted that Guinn himself said the Legislature must increase taxes by $704 million over the next two years to continue state services at current levels.

"We are giving him a little cushion," he said. "This committee has done its part."

The governor sought $1 billion in tax increases over the next two years, but has said in recent days that approving increases above the $704 million level is up to the Legislature.

McGinness added that his committee remains firmly opposed to Guinn's plan to levy a gross receipts tax, though he concedes he expects a major fight over the tax during the final 17 days of the legislative session.

He also expects his committee on Monday will back a $40 per year increase in the $100 per employee annual business license tax, pushing the total tax increases to about $800 million.

Members rejected his proposal Thursday to increase the business license tax to $200 a year per employee. Guinn wants to increase this tax even higher, to $300 per year per employee, assessing the tax even on Avon and Mary Kay salespeople.

Sen. Randolph Townsend, R-Reno, said he will propose a new business tax plan at the committee's Monday meeting. He contended a tax of at least $200 per employee per year is necessary in case the economy sours and state tax revenues drop.

Perkins, however, said the committee's approval of a potential $800 million in tax increases shows there is not that big of a gap between what Republicans and what Democrats think is a necessary tax increase.

"It gives us some room to negotiate over," he said.

Sen. Ann O'Connell, R-Las Vegas, insisted she will not support any additional tax increases. She is concerned that the Senate Finance Committee and the Assembly Ways and Means Committee have been approving spending proposals that will jack up the need for taxes even higher than Guinn's $1 billion plan.

"I am certainly not prepared to go any higher than I have gone," O'Connell said. "I don't think you can have one committee directing to the tax committee what it has to do. This is the tax committee."

Although all state agency budgets have not been finalized by the finance and ways and means committees, current projections show the committees will need at least $200 million more than Guinn requested.

O'Connell said it is not too late for the budget committees to reduce state spending proposals so they fit within the tax increases approved by McGinness' committee.

Gaming industry lobbyist Harvey Whittemore said the votes Thursday represent only the start of coming decisions by legislators on tax proposals. He said the votes are far from final and ultimately legislators will back a major tax on business.

"There is a big gap," he said. "It is going to be moderated by people not in this room. There is going to be a compromise. I guarantee you it is going to be more than $800 million."