Wednesday, May 21, 2003 | 10:57 a.m.
CARSON CITY -- Lawmakers appeared receptive Tuesday to a tax proposal that tweaks the controversial gross receipts tax to address the concerns of low-margin companies.
Assembly Taxation Committee Chairman David Parks, D-Las Vegas, said he plans a work session Thursday to examine the Unified Business Tax in greater detail.
"The UBT is a much more reasonable tax," Parks said. "It's a measure that would more fairly address the concerns we've heard about the gross receipts."
Nevada Task Force on Tax Policy Chairman Guy Hobbs and economist Jeremy Aguero said they worked on the UBT at the request of lawmakers who had concerns about the gross receipts tax. The gross receipts tax is the centerpiece of the task force's proposal to raise millions in new revenue to cover the budget for the next two years. The UBT would allow a business to choose between paying the gross receipts as proposed -- one quarter of 1 percent on receipts over $450,000 -- or taking an alternative that allows for a deduction for the cost of the goods sold by the business.
The second option would be a 1 percent tax on the business' total revenue less the cost of the goods sold, which is narrowly defined to include just business inventory, not salaries, health care or other expenses.
Companies that have 75 percent or more of their business attributable to goods sold would benefit from taking the alternative 1 percent tax, Aguero said. One example Aguero used was a company grossing $10 million that would be subject to $25,000 in taxes under the gross receipts tax. If that company, got 80.6 percent of its revenue from goods sold -- which is the case for manufacturers -- the company would pay $17,000 under the UBT, a 28 percent reduction from the proposed gross receipts levy.
The types of businesses that would see reduced taxes are grocery stores, manufacturers, wholesalers, agriculture and general merchandise.
The $450,000 exemption would still exclude roughly 62 percent of business from paying the UBT. The tax, which could go into effect next year or the following, is estimated to generate about $220 million a year.
It could become part of the Assembly Taxation Committee's overall revenue plan to raise roughly $450 million in the first year and about $560 million in the second. That plan also will be heard by the committee Thursday.
Assemblyman Josh Griffin, R-Henderson, said the UBT satisfied his two main concerns with the gross receipts tax, even though he still has concerns about the overall direction of the budget and tax plans.
"This does take care of my biggest concerns," Griffin said. "Does it make the tax passable? I don't know."
Assembly Minority Leader Lynn Hettrick, R-Gardnerville, has been the most vocal opponent to the gross receipts tax and said the Unified Business Tax did not address concerns he had about the tax offering no break to businesses that provide health-care benefits.
He repeated his often-stated theory that government should not continue to spend additional money on the backs of the private sector during bad economic times.
"This is a time for restraint," Hettrick said.
Assemblyman David Goldwater, D-Las Vegas, argued the opposite, saying: "When the economy goes bad, people don't look to entrepreneurships, they look to government for help."
Ways and Means Committee Chairman Morse Arberry Jr., D-Las Vegas, uncharacteristically joined the conversation, arguing that he has shepherded two decades of "cut, cut, cut."
"The people are demanding services," Arberry said. "We cannot continue to think we can survive with cut, cut cutting."
Hettrick also said that government should operate on a budget as families do, with savings accounts to control spending.
Arberry, referencing the Legislature's wiping out $135 million from the so-called rainy day fund, said: "We had a savings account. We done spent the savings account."
"We need to go ahead and do the taxes," Arberry said.
Parks told his committee that the moment the 1981 tax shift away from property tax was finalized, "we all left the session knowing we had put a Band-Aid on a big wound."
The business community, as represented by the Las Vegas Chamber of Commerce, didn't attend the Assembly Taxation Committee hearing as its lobbyists had been dutifully showing up at the Senate Taxation Committee hearings.
The Senate committee has included a 1 percent sales tax on services -- a modification of an idea proposed by the Business Representative Group.
Gov. Kenny Guinn said he would not sign a sales tax on services because it is not a business tax but a tax on residents.
Las Vegas Chamber President and CEO Kara Kelley said Tuesday she could not comment on the Unified Business Tax because she was not at the hearing.
Instead, the Business Representative Group, of which she is a prime player, was floating its "Tax Proposal to Go Home."
The plan, which raises $988 million over the next two fiscal years includes proposals already adopted by the Senate tax panel, including the 1 percent service tax.
Chamber lobbyist Sam McMullen said Tuesday the UBT is "really no change from the GRT."
Daryl Capurro, who lobbies on behalf of the trucking industry, said the UBT doesn't help his group because it excludes only the cost of goods sold.
"That wouldn't help us," Capurro said. But gaming lobbyists worried the UBT's potential problem is that it already offers assistance for low-margin businesses and could exempt more in the future.
"Under this margin cap, a number of big businesses will get off," said Billy Vassiliadis, lobbying on behalf of the Nevada Resort Association.
"We hope that this cap isn't a running discussion ... of who else doesn't have to pay," he added.
Gaming companies would not be affected by the UBT, since only roughly 8 to 10 percent of their business is a result of the cost of goods sold. Gaming has committed to paying the one quarter of 1 percent tax on its non-gaming gross receipts and to a 0.25 percent increase in the gaming tax it pays on its net win.
Nevada Taxpayer Association President Carole Vilardo said that while she had no immediate stance on the UBT, she said the tax package will be "sticker shock" and that budgets should be cut.
Hettrick said the tax package is essentially "an excuse for spending to the hilt. When is enough, enough?"
Assembly woman Peggy Pierce, D-Las Vegas, said one of the things that would be enough "is funding education at the national average."
To Vilardo, Pierce asked: "The task force worked for two years. What length of time would your members like to avoid sticker shock?"
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