Gibbons promises veto of tax bill

By Cy Ryan

Published Friday, May 22, 2009 | 4:33 p.m.

Updated Friday, May 22, 2009 | 7:32 p.m.

CARSON CITY – Lawmakers passed legislation today requiring that Nevadans pay higher sales tax and vehicle registration fees and that bigger businesses pay higher payroll taxes. And Gov. Jim Gibbons said he will veto it.

The governor received the package from legislative staff at about 4:30 p.m., a half hour before the Legislature's self-imposed deadline. Gov. Jim Gibbons went out to receive the bill.

"I think this is the wrong time for a billion-dollar tax increase," he said, promising a veto.

The tax over the next two years totals $781 million. Add on an additional $219 million from the 3 percent room tax passed earlier this session -- which was included in Gibbons' budget -- and the amount in total new taxes would approach $1 billion.

The taxes and fees are part of the $390 million-a-year increase in taxes to finance the state’s $6.745 billion two-year general fund budget.

Smaller business would get a tax break under Senate Bill 429.

The Legislature wanted to get its legislation in the hands of the governor today. Gibbons has five days to act on the bill. His veto would give lawmakers enough time to try to override it. The session ends June 1.

The Senate, where it passed on a 17-4 vote, needed 14 votes, which is two-thirds of its members, to approve the measure. It then passed the Assembly.

On July 1, the sales tax would rise by 0.35 percent for the next two years.

The bill changes the payroll tax on businesses which is now 0.63 percent. For businesses that have a payroll of more than $62,500 per quarter, their tax would rise to 1.17 percent. For those less than $62,500 per quarter, their rate would drop to 0.5 percent. That also would become effective on July 1.

There is also an increase in the business license tax from $100 to $200 a year.

Sen. Barbara Cegavske, R-Las Vegas, called the tax on business a “job-killing tax and a business-killing tax.” She said it would result in more layoffs.

Voting against the bill were Cegavske and Republicans Mark Amodei of Carson City, Mike McGinness of Fallon and Maurice Washington of Sparks.

The governmental service tax imposed yearly on autos and truck would increase starting in September. It would raise an estimated $94.3 million during the next two fiscal years.

A vehicle owner now pays $33. In addition there is the service tax based on the value of the vehicle. The depreciation rate on the vehicle will change. For instance a car that is one year old now is valued at 85 percent for tax purchases. It will rise to 95 percent.

The minimum services tax also rises from $6 to $16 on vehicles.

Cegavske suggested the business payroll tax would be an “accounting nightmare” for businesses that hire seasonal workers. She said they would have to compute the percentage tax they would pay when the extra help is on the job.

But Russell Guindon, a senior deputy fiscal analyst for the Legislature, said he did not think it would be any more complicated than the current tax.

Senate Minority Leader Bill Raggio, R-Reno, suggested a two year “sunset” or end of the business tax and sales tax on June 30, 2011. The Senate agreed to that.

The government service tax on vehicles will continue for four years with the money coming into the state’s general fund. Than the tax collections will go to the state highway fund.

Raggio and Steven Horsford have agreed for an independent study of Nevada’s tax structure. Raggio said that may take up to $500,000 to hire a company to look at the system involving both the state and local governments.

Earlier in the day, the Senate voted 16-5 for the general appropriation that funds state government and sent the measure to Gibbons.

Those voting against Assembly Bill 562 were Republicans Amodei, Cegavske, McGinness, Dean Rhoads of Elko and Washington.