Business calls for increases in existing taxes to cover shortfall

Business leaders Wednesday recommended Nevada fix its short-term budget shortfall by boosting existing tax levies such as the business activity tax and consider extending the sales tax to some services as a long-term fix.

The report by a coalition of business groups was their first response to a promise they made nearly two years ago that business would help the state find something other than the teachers union's proposed business income tax to get state government more revenue.

Because of the economic slump, magnified by the drop in tourism business following Sept. 11, the state is looking at a potential budget shortage of more than $250 million.

Mary Lau of the Retail Association of Nevada told the Governor's Task Force on Tax Reform doubling the business activity tax from $25 per employee per quarter to $50 would generate cash immediately to help cover the budget shortfall.

"It's stable, predictable and can be immediately implemented," she said.

But casino executive Mike Sloan attacked the proposal pointing out that more than 60 percent of Nevada businesses have four or fewer employees.

By comparison, he said, larger companies with hundreds and even thousands of employees generate revenues that are far less per worker yet pay the vast majority of the business tax.

"There's no apparent relationship between the tax and the revenues, let alone the profitability -- of the companies that are being asked to pay it," said Sloan. "It doubles the tax burden on those who are paying the tax and I'm not sure that broadens the tax base," he said adding that the task force was specifically charged by Gov. Kenny Guinn with broadening the tax base.

"It was not intended to," said Lau. "It was intended to provide for the immediate needs."

Randy Robison of the National Federation of Independent Business followed Lau, telling the task force business believes expanding the sales tax to include "a range of services" is the key to a long term solution to Nevada's revenue problems.

He added that, if state needs continue to outpace revenues, "a property tax increase may need to be considered."

But he said businessmen rejected as unacceptable the idea of a business income tax, assets tax or gross receipts tax.

Sloan said casinos, which generate 80 percent of the business revenue in Nevada, are essentially escaping taxation. Gaming officials made it clear in the 2001 Legislature that while they may agree to pay more taxes to generate revenues needed by the state, they don't intend to get stuck with that burden while other businesses escape taxes.

Carole Vilardo of the Nevada Taxpayers Association and Ray Bacon of the Manufacturers Association also said business wants the state to improve efficiency of its operations and close down loopholes in existing tax structures. They said the structure of the Nevada tax system itself needs to be fixed.

"Nobody in their right mind would develop what we have today," said Bacon. "The existing system needs politically difficult changes."

The task force was also urged to increase the state cigarette tax dramatically. But advocates led by Reno Assembly candidate Kendall Stagg said they should do so as much because higher prices cut down teen smoking as for the revenues. He said raising the tax would generate state revenue, cut down on teen smoking and convince other smokers to quit and -- in the process -- reduce the financial impact of tobacco-caused diseases on the state Medicaid budget.