Senate Dems don’t endorse Spearman’s tax alternative

CARSON CITY — Senate Democrats have not endorsed a conceptual tax blueprint presented this week by Sen. Pat Spearman that calls for eliminating Nevada’s modified business tax.

Senate Minority Leader Aaron Ford, D-Las Vegas, said Friday that while he agrees the tax that brings in $400 million annually should be scrapped, the Democratic caucus has not taken a position on any tax proposals as yet.

Ford said the caucus is aware of Spearman’s idea but reserves its endorsement of any plans “until they’re all vetted.”

During a presentation Thursday night before the Senate Committee on Revenue and Economic Development, Spearman, D-North Las Vegas, said she was preparing a plan to eliminate the modified business tax from Nevada’s revenue stream.

But she had no details on how to backfill the $800 million funding hole that eliminating the tax would create. Pressed by Senate Majority Leader Michael Roberson, R-Henderson, she conceded she was looking at various business tax options.

Spearman said Gov. Brian Sandoval’s proposal to overhaul Nevada’s business license fees “is a really good start,” but she also wants to look at “other options, hybrid options.” Sandoval’s plan is projected to generate $250 million annually and is separate from the modified business tax talk.

“I have no illusion that the plan I come up with will be met with dancing in the streets,” she said.

The modified business tax is imposed on payroll and paid quarterly. Under existing law the first $85,000 in quarterly wages — or $340,000 annually — is exempt, meaning only a quarter of companies that could be subject to the tax actually pay anything. Of Nevada’s more than 300,000 businesses, less than 4 percent pay.

While critics of the tax argue it discourages hiring, others say it has its advantages. It’s a stable revenue source insulated from the volatility suffered by Nevada’s other tax sources in economic downturns. A report by the Washington, D.C.-based Tax Foundation said eliminating exemptions and implementing an across-the-board 2 percent levy would generate an additional $400 million annually. Lowering the rate to 1.17 percent would bring in $83.7 million; and 1 percent, $5.7 million.

Business groups also say it’s easy to calculate, and the Retail Association of Nevada for one supports tweaking the modified business tax to raise more money over other ideas such as Sandoval’s business license fee proposal.

The governor’s plan, expected to be introduced in bill form in about a week, would replace Nevada’s existing $200 annual business license fee with a tiered rate schedule based on gross receipts and different industry categories. Fees would range from $400 to $4 million, though no business currently meets that top threshold.

Mary Lau, president of the retail association, said she supports what the governor is trying to do to stabilize Nevada’s tax stream and improve education. It’s the structure of the business license fee that gives her pause.

With a spreadsheet of 30 different industry categories and various rates depending on gross receipts, Lau fears ongoing battles in the Legislature every two years, with sectors competing to have their rates reduced or spared when the state seeks to fill its coffers.

It will come down to “who’s going to get gored,” she said.

“The future of that tax plan scares me,” Lau said, equating it to a “full employment act for lawyers and lobbyists.”

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