Sandoval’s business fee hikes would hit small businesses, critics say

CARSON CITY — The full Senate waded Thursday into Gov. Brian Sandoval’s plan to hike Nevada’s business license fees to raise money for his education priorities.

Administration officials went before the Senate to answer questions a day after Sandoval presented Senate Bill 252 to a smaller group of lawmakers.

And senators came loaded with questions, many dealing with concerns about the burden on small businesses.

State Sen. Mark Lipparelli, R-Las Vegas, asked why small businesses would see a doubling of the license fee, from $200 to $400, under the governor’s plan.

Jeremy Aguero, an economist with Applied Analysis who helped draft Sandoval’s plan, said an estimated 180,000 small businesses with no employees would see their fees double but are not subject to other levies such as the payroll tax imposed on employee wages.

Aguero added that large companies with higher revenue will see much bigger license fee increases, “in many cases going from $200 to $1 million.”

State Sen. Patricia Farley, R-Las Vegas, said companies already struggling to stay alive might “wonder if it’s worth it” to stay in business given the fee increase.

“This is huge to small businesses that are in the gray and not in the black,” said Farley, owner of a concrete, paving and masonry company.

Senate Majority Leader Michael Roberson, R-Henderson, who is also chairman of the Senate Committee on Revenue and Economic Development, said earlier Thursday he still hopes to pass a tax package out of the chamber by the end of March or early April. He said the committee will hear an alternative tax plan proposed by Sen. Pat Spearman, D-North Las Vegas, next week. Today, the committee is scheduled to consider another bill to extend the “sunset” taxes that Sandoval wants to make permanent.

Sandoval, a popular Republican elected to a second term in November with more than 70 percent of the vote, led off a marathon hearing Wednesday, making his case for what could be the largest tax hike in state history to raise the status of Nevada’s education system.

“Our greatest investments and most strategic reforms must be in the way we educate our children,” Sandoval said, reiterating his pledge to dedicate his second term to the state’s youth and education.

Nevada must raise the bar on student achievement to compete in a cutting-edge world and attract high-tech jobs, he said, tying his education ambitions to economic development efforts.

Sandoval’s plan would replace Nevada’s flat $200 annual business license fee with a tiered system based on industry category and gross revenue. Fees would range from $400 yearly up to $4 million.No existing business in the state has enough revenue to be charged the maximum.

The measure, once fully implemented, is projected to raise $250 million annually and is the cornerstone of Sandoval’s proposed $1.1 billion in new and extended levies to fund his education agenda and $7.3 billion general fund budget.

Sandoval’s leadoff testimony, accompanied by endorsements from three former governors, kicked off Wednesday’s joint session of the Senate Revenue and Assembly Taxation committees. It was followed by a parade of industry and business groups who lined up to support it — gaming, mining, hospitals, contractors, even taxicab companies.

Billy Vassiliadis, representing the powerful Nevada Resort Association, reminded lawmakers that the casino industry has long advocated for a broad-based tax plan to help Nevada weather severe economic downturns. And while state leaders have long talked about stabilizing Nevada’s tax base, they have failed to act.

“For 25 years we’ve stopped at the crossroad,” Vassiliadis said. “We ought to actually cross the road.”

If the measure passes, he said, the casino industry will pay 58 percent of all business taxes collected by the state.

But not everyone is enamored with the governor’s proposal. Opponents, who waited well into Wednesday evening to testify against the bill, said doubling the minimum business license fee would be a financial burden on small businesses.

Nevada Policy Research Institute, a private, conservative think tank, called Wednesday’s hearing a “political circus” and a “dog-and-pony show” that doesn’t hide problems with the governor’s bill. The Retail Association of Nevada, which historically has opposed taxes linked to gross receipts, also opposed the bill.

The 4,000-member Las Vegas Metro Chamber of Commerce supports the need for education reform and more funding to ensure a qualified workforce, chamber President Kristin McMillan said. But the chamber is on the fence about the governor’s funding proposal.

McMillan said chamber members want more time to analyze the governor’s proposal and any other tax plans that might emerge during the 120-day session, which ends June 1.

They also want details on Sandoval’s education reforms and accountability safeguards before signing off on a plan.

Contact Sandra Chereb at schereb@reviewjournal.com or 775-687-3901. Find her on Twitter: @SandraChereb.