CARSON CITY — Increases in sales, car registration and two other taxes will bring in about $709 million of the $780 million in tax increases that legislative leaders believe they must pass before June 1 to limit state budget reductions to a reasonable level.
The tax plan was discussed today during a joint Senate-Assembly taxation meeting. Assembly Taxation Chairwoman Kathy McClain, D-Las Vegas, said an actual bill to increase the taxes could be ready Monday and legislators hopefully will adopt it by Wednesday.
The four taxes they intend to increase are:
— The modified business, or payroll tax. This tax is now 0.63 percent of each company’s total payroll but lawmakers propose doubling it to 1.25 percent. The first $250,000 in payroll, however, will be taxed at a lower rate, 0.5 percent, a change designed to win favor of small businesses. This would bring in $349 million over two years, according to legislative fiscal analyst Russell Guindon.
Guindon added he does not know the effect of a proposed amendment to require independent contractors, such as real estate agents, strip club dancers and legal prostitutes, to start paying this tax.
— The state sales tax. The rate, now 6.5 percent, would grow to 6.75 percent. This increase is expected to bring in $194 million over two years.
Since Clark County voters have approved local tax increases on top of the state rate, the sales tax rate there would increase to 8 percent, instead of the current 7.75 percent. Utah has a 5.7 percent rate, while the rate in Los Angeles is 9.25 percent.
— The business license tax. Lawmakers are considering doubling the current $100-a-year license tax paid by all businesses to $200. Additionally, businesses with multiple locations such as chain restaurants, would to pay the tax at each location. They now pay only at one location. Guindon estimated the increase would bring in $72 million over two years.
— Motor vehicle taxes. Lawmakers are looking at reducing the depreciation allowances that motor vehicle owners receive each year when they re-register their vehicles. Owners of cars more than nine years old would also be required to pay a minimum registration tax of $16 a year. The minimum now is $6. Guindon estimated these tax changes would bring in an additional $72 million over two years.
“Here we are again, another Band-Aid to get us through another crisis,” McClain said during the hearing.
McClain finds the sales tax increase especially repugnant, but said she will support it. Sales tax increases hurt poorer people, she added.
Since the taxes do not add up to the $780 million that legislative leaders have set as a goal in private, core group meetings, lawmakers still may have to find other taxes to increase. In an interview, Assemblywoman Sheila Leslie, D-Reno, said liquor and cigarette tax increases are “backup” taxes that may be considered if necessary.
The hearing was the first the committee has held on three of the four taxes that will become part of the total tax package.
Nonetheless, Sen. Maggie Carlton, D-Las Vegas, was the only one of the seven Senate Taxation Committee members at the meeting.
Others had left earlier to go home for the remaining part of the weekend. All Assembly Taxation Committee members attended the hearing.
Assembly Majority Leader John Oceguera, D-Las Vegas, said earlier today that Democrats and Republicans are “very close” to a final agreement on the revenue plan.
“It’s a three-legged stool,” he said. “We have to raise revenue, cut a lot and use the federal stimulus money. I guess we also have to raid the counties.”
Even with the tax increases, legislative leaders expect to cut state spending about $1 billion from the nearly $8 billion they contend they need to keep services at levels expected when they adjourned the 2007 session.
The 2007 Legislature set state spending at $6.8 billion for the two-year budget period that ends June 30. Because tax revenue has fallen during the recession, actual state spending during the current budget period will be about $6.3 billion.
If the tax increases are approved, then spending in the two-year period beginning July 1 will be about $6.8 billion.
The issue of taking property taxes from counties never came up during the Senate-Assembly taxation hearing.
Legislators are prepared to redirect a small percentage of property taxes from Clark and Washoe counties to the state. This step will bring the state about $80 million, although there are reports that even more will be taken.
They also intend to grab $50 million from the counties by taking property tax revenue that normally would go to the county indigent accident fund. The University Medical Center in Las Vegas will lose $40 million from this raid.
The subject of increasing mining taxes was not brought up today. Jan Gilbert, a lobbyist for the Progressive Leadership Alliance of Nevada, complained lawmakers were talking about raising “regressive” taxes like the sales taxes, while letting mining escape an increase in the net proceeds of a minerals tax.
PLAN has vowed to circulate a petition to change this tax if the legislators do not increase taxes on mining.
Carlton expressed concern about the changes in the minimum payment to register a car. She said she has several older cars for her children and thought the increase was too much. Industry lobbyists, however, said after the meeting that the increase on each older car would be $10 a year.
Assemblyman Ed Goedhart, R-Amargosa Valley, also expressed concern about paying more to register older cars.
“I live in the rurals where a lot of time we have 10 cars that don’t move and a house that does,” said Goedhart.
Contact reporter Ed Vogel at email@example.com or 775-687-3901.