DIFFERENT TAKES ON TAXES

Sides are lining up in a looming battle over taxes, as public officials and business leaders consider how to plug a $500 million shortfall in the state’s budget.

The Nevada State Education Association wants to raise the gaming tax 3 percentage points to finance public schools, while gaming companies say it’s time for nongaming businesses to pay more, too.

A Las Vegas Review-Journal/Las Business Press survey of local businesspeople has found widely varying views on new taxes.

Opinions were evenly split on increasing the gaming tax to finance education, with 51.6 percent of respondents giving the higher levy a thumbs up and 42.6 percent rejecting the idea. Nearly half — 44.4 percent — said they’d like to see proceeds from a bigger gaming tax go to other sectors besides education. Tops on their wish list were areas including transportation, infrastructure, Medicare, children’s welfare programs and health care for the indigent.

The online survey also asked business managers for their thoughts on a “broad-based” corporate income or receipts tax that some local gaming executives are promoting as an alternative to higher casino fees. About two-thirds of survey participants said they would not support broad-based business taxes that would add to their operating costs.

Survey respondent John Gibson, chairman and chief executive officer of chemical maker American Pacific Corp., took issue with both higher gaming taxes and broader corporate levies.

Gibson, who’s on the board of the Nevada Taxpayers Association, took issue with using the referendum process to expand the gaming tax. Setting tax rates is the province of the state Legislature, Gibson said. Nor does he favor imposing additional burdens on an economic sector that employs a substantial portion of Nevada’s work force.

And new taxes on nongaming businesses could harm the low-tax reputation that has drawn relocating companies to Nevada from across the country, Gibson said.

He called the gross receipts tax a failed proposal from the state’s 2003 legislative session, “one of the most unfair taxes anyone has considered,” because a business could lose money and still owe money under such a revenue scenario.

“It’s been wonderful to watch the incredible growth of Las Vegas,” Gibson said. “I believe that growth is, in large part, due to how we tax businesses. This community has a very positive future so long as we don’t tamper with the fundamental laws that make it all possible.”

Should fresh calls for a gross receipts tax or another broad-based levy emerge in the 2009 legislative session, Gibson expects the nongaming business community to “aggressively oppose it.”

Richard Olden, owner of car-wash business WashWorks, agreed that a broad, gross receipts-type tax on nongaming businesses would hurt the survival prospects of companies with small profit margins.

“Most businesses don’t earn anything approaching what the casinos earn,” Olden said. “It’s a disproportionate increase for small companies when you bump our taxes up 1 percent.”

Also, previous tax increases don’t leave Olden with much confidence in future plans to raise revenue.

The gross-payroll tax, the state business-license fee and other levies added in 2003 to relieve a $1 billion budget shortfall didn’t disappear once Nevada’s income and spending plans stabilized in 2004, 2005 and 2006, he noted.

“It’s easy enough to pass new taxes, but no one looks back and asks if we still need them,” Olden said. “There’s no sunset law. That’s a peeve.”

Still, quality education is essential to building a world-class economy, Olden said, so he understands the need for additional school funding. And when Olden sees the gaming industry setting records for monthly revenue — the sector posted an all-time single-month high of $1.164 billion in October — he said it’s easy to divine the best source for extra education dollars.

What’s more, gaming operators benefit from privileged licenses, said Perry Ursem, a business-development executive in the construction industry. That barrier to entry for competitors gives gamers an advantage that should be factored into any talk about taxes. The debate should also include talk about the potential harm higher taxes would do to smaller operations, Ursem said.

“When you start to dip your hands into the pockets of the smaller businesses that are the foundation of this community, that can have an effect on the long-term stability of Nevada’s business community,” he said.

Local business executives who advocated broad taxes didn’t elaborate on their opinions by press time. But they said in their survey responses that the soundest path to fiscal stability lies with a tax base that includes as many companies and industries as possible.

“There needs to be a more balanced approach,” wrote Tony Sanchez, corporate senior vice president of Nevada Power Co. parent Sierra Pacific Resources. “Gaming can be looked at, but other sources of potential revenue need to be on the table.”

And John Moran, principal of Moran Financial Services, urged business executives in the nongaming sector to consider ponying up additional funds for important public services, rather than hitting up the gaming industry for yet another tax increase.

“The educators are risking killing the goose that lays the golden eggs,” Moran wrote in the survey. “The casino industry is a driving force in the Nevada economy. All other businesses should start to get involved on an equitable basis.”

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or (702) 380-4512.

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