Republican gubernatorial candidate Mike Montandon launched a petition Thursday against the prospect of a state sales tax on services, which he said would harm small businesses.
The news conference announcing the initiative was an attempt to mark Montandon, the departing mayor of North Las Vegas, as the most active candidate at this early stage of the 2010 gubernatorial race. He is the first to roll out policy positions as part of his bid.
A tax on services, from haircuts to locksmithing, is a “fancy term for an income tax,” Montandon said, and as such something that goes against Nevada tradition.
“It’s a tax on the talents and abilities of each individual,” he said. “Every individual who looks out for an opportunity to be an entrepreneur would be shot down by saying, ‘We want to tax your time.'”
No such tax has yet been proposed as legislative leaders try to focus the debate on spending before they talk about revenue. But Montandon said it’s widely known that a service tax is under consideration to patch the state’s $2.2 billion budget hole.
The mayor was joined by about a dozen supporters and business people. He spoke in front of a borrowed RV draped with a “Mike Montandon for Governor” sign that was parked at a big-box shopping complex near the Las Vegas Beltway and Rainbow Boulevard.
Aides said the petition would be circulated on paper and would be available on the campaign Web site. Once 5,000 to 6,000 people have signed it, Montandon plans to deliver it to legislators in Carson City.
About a third of the state’s general fund revenue comes from the state sales tax on retail goods. But in a state with a service-based economy, sales of most services aren’t taxed, with exceptions such as the tax on live entertainment.
Montandon said he is not categorically against all taxes if a careful analysis reveals that the state needs more revenue for prudent spending on base services. Better than a tax on services, he said, would be increasing the rate of the narrow sales tax the state already collects.
“The consumptive-based taxes, sales-based taxes on items, is probably the most viable means of a broad-based tax because it identifies the people who are still spending, not the people who are earning less,” he said.
Businesses generally pass on sales taxes to consumers — multi-state retailers, for example, tend to charge the same sticker price for the same item in states with different tax rates — but Montandon said a tax on services might not work that way.
Instead, he said, higher prices because of taxes would cause people to cut back on the services they purchase.
“It ends up hurting the people who are selling, not the people who are buying,” he said.
Assembly Speaker Barbara Buckley, D-Las Vegas, said there is no bill or other proposal in the works to impose a services tax. But she said the budget situation is too serious, and the discussions about fixing it too preliminary, to rule anything out yet.
“This morning we announced a 37 percent reduction in revenue from the levels necessary to maintain the current services of the state of Nevada,” she said. “It’s always great to hear what someone’s against, but what’s their solution to the unprecedented crisis our state faces?”
Montandon, 45, is leaving office this summer after three terms as mayor of the state’s fourth-largest municipality. He is one of two Republicans who have announced they plan to challenge Gov. Jim Gibbons in next year’s primary, with former state Sen. Joe Heck.
Brian Scroggins, a local Republican activist and former candidate for state and county office, attended Thursday’s news conference and cheered Montandon’s initiative.
“I own a sign company, and we’re barely making payroll,” he said. With a customer base dominated by contractors, developers and homebuilders, business has nearly dried up.
“Now is not the time to put a new tax on small businesses,” he said.
Scroggins said he is supporting Montandon for governor, though the incumbent is also a Republican.
“I appreciate the struggles the governor has had,” he said. “But it bothered me a lot when he threw the first lady out of the house — the personal issues, integrity issues. Mayor Montandon is a very honest, hardworking man of integrity.”
As part of the divorce proceedings Gibbons initiated last year against Dawn, his wife of 23 years, he asked a judge to force her to move out of the Governor’s Mansion.
Heck said he would also be “100 percent against” imposing a services tax, but he saw it as no different from the sales tax on goods, which he would oppose increasing for the same reason.
“Like the sales tax, it’s another regressive tax,” Heck said. “Any expansion of the sales and use tax is a tax that people with lower incomes will pay more.”
He also said he viewed the petition effort as a bit premature.
“It’s always beneficial to raise awareness of what might be coming down the pike, but until you know the details of what the Legislature is trying to pass, you’re rallying against an idea, not a bill,” Heck said. “Let’s be deliberative in our decision-making, not knee-jerk a response like we have so many times in the past.”
Gibbons also would oppose any proposal to tax services as part of his opposition to new or increased taxes generally, said his spokesman, Daniel Burns.
“It couldn’t possibly be more clear: The governor does not support any new taxes,” Burns said. “If it’s a tax increase, a fee increase, it will be vetoed.”
Montandon said the service tax stance was an instance in which he agreed with Gibbons.
“I want to make sure people understand what this means to them,” he said. “I’m not going head-to-head with Governor Gibbons on this issue.”
Contact reporter Molly Ball at email@example.com or 702-387-2919.