Sales tax hike focal point of plan

Increases in sales and car registration taxes joined business taxes as part of the plan to balance Nevada's budget Saturday.

The proposals spelled out in a joint Assembly/Senate Taxation Committee meeting would raise a total of $359.3 million, according to staff estimates. With the projected revenues from increasing the Modified Business Tax presented a week ago, that brings the total package thus far to $709 million.

But Assembly Taxation Chairwoman Kathy McClain, D-Las Vegas, said it still is a "Band-Aid approach to get us through the biennium." She said leadership wants a thorough study of how to permanently reform Nevada's tax system between now and the 2011 Legislature.

The biggest puzzle piece presented Saturday is a quarter percent increase to the sales tax which would raise an estimated $193.4 million during the biennium. Since the state's portion of sales taxes is set at 2 percent, the plan is to instead increase the Local School Support Tax, which lawmakers say frees up General Fund money for other purposes.

The impact of a quarter percent increase would raise Nevada's base sales tax to 6.75 percent. But since area counties all have optional taxes above that base, the rates in Carson City, Washoe, Douglas, Lyon, Storey and Churchill counties would all be higher than that.

Highest in the state would be Clark at 8 percent.

Jan Gilbert of the Progressive Leadership Alliance of Nevada urged lawmakers to sunset the higher sales tax saying it is regressive and hits those with the least income hardest.

Ray Bacon representing manufacturers said a better solution would be to convince Congress to pass the streamlined sales tax law, which would get the tax money from online purchases which states can't currently collect.

"All that's doing is effectively collecting the sales we are not collecting," he said, estimating it would bring the state upward of $100 million a year.

The second piece of the puzzle is a proposal to double the business license fee, now $100 a year for each business, and to charge it for every physical location, branch or franchise the business has. Along with that, Assemblywoman Sheila Leslie, D-Reno, said there is legislation to make all businesses registered with the Secretary of State pay that fee. Together, she said, staff estimates the state would get $71.6 million during the biennium.

Finally, Democrats argued for changes to the depreciation schedule for the Governmental Services Tax, essentially a property tax on car values assessed each year at registration.

The plan would slow the depreciation rate by 10 percent a year, generating an estimated $94.3 million during the biennium.

Trucking industry lobbyist Paul Enos said the higher registration fee is "one of the most regressive taxes there is" because the cost will be passed on to buyers of all goods trucks carry.

Those proposals along with the Modified Business Tax increase, will be included in legislation Leslie said they hope to introduce Monday.

The MBT proposal would raise the payroll tax from 0.63 percent to 1.25 percent, generating $349.8 million over the biennium.

The plan to make employers pay the tax for independent contractors as well as direct employees would further increase the revenue from that proposal but analysts say they have no good way to estimate how much.

George Flynt, representing Nevada's legal brothel operators, praised the proposal saying legal prostitutes and brothel operators look forward to contributing to the state General Fund.

He said the average working girl would pay about $1,280 a year and generate about $1 million for the state.

"For goodness sake, don't exempt us out," he said. "We're ready to pay."