Public hearing on proposed business tax hike draws little protest

By Cy Ryan

Monday, Oct. 25, 2010 | 2:47 p.m.

CARSON CITY – An owner of a restaurant chain in Las Vegas believes a proposed increase in the unemployment tax next year would mean more layoffs and businesses closing.

Justin Micatrotto, owner of Raising Cane Chicken Fingers, said during a public hearing Monday, “there is no reason not to go to Phoenix.”

Micatrotto and Jeff Ecker, of Paymon’s Mediterranean Café, were the only two small business owners to testify at a public hearing to protest a recommendation of the council of the state Employment Security Division to raise the average tax rate from 1.33 percent to 2 percent.

They each spoke in behalf of the 5,200-member Nevada Restaurant Association.

It will mean an average increase of $78 per worker to employers annually. New employers pay a 2.95 percent rate for three to four years.

The higher the turnover rate of employees, the higher the rate businesses pay, ranging from 0.25 to 5.40 percent on the first $26,600 an employee earns. For instance, the construction and restaurant industries were hit hard by the downturn in the economy and these companies experienced higher turnover, so their rates will rise.

Division Director Cathy Jones will make a final decision Dec. 7 on whether to follow the recommendation of the advisory council to increase the tax businesses pay.

The state’s unemployment trust fund is broke and the state had borrowed $500 million from the federal government as of Oct. 1 to pay 26 weeks of benefits for the jobless. The federal government is picking up the tab for the extension of benefits beyond the 26 weeks.

Micatrotto, who has several restaurants in Las Vegas, said the proposed increase would cost him an extra $82,000 a year. He suggested the tax base be broadened or bonds be issued.

Ecker said restaurants are “hanging on by a thread. He said restaurants earned 4-5 cents on each dollar and “small business is really up against it.”

The employment security division has reserved a bill in the Legislature to make a special assessment on employers to pay off the $29 million in interest on the federal loan.

If the tax rate remains at 2 percent, the federal loan wouldn't be repaid until 2015-16, said David Schmidt, an economist for the state, and the state’s unemployment trust fund wouldn't be solvent until 2018.