 Taxing Times On The Horizon
Date: January 27, 2003
Section: Vol. 20, No. 4; Pg. 1; ISSN: 10712186
Byline: John Seiler
Nevada's business community is buzzing over Gov. Kenny Guinn's $1 billion tax plan.
In his State-of-the State speech last week, Guinn raised the exemption on a proposed gross receipts tax to $450,000. He also recommended tripling the current $100 annual per employee business license tax, and a 50 percent increase to the $175 fee charged by the secretary of state to Incorporate businesses in Nevada.
Among business owners there is both concern and hope.
A source of concern since the Governor's Task Force on Tax Policy first made these recommendations is the across-the-board nature of the gross receipts tax. That move would apply a quarter of a percent tax on all businesses regardless of their margins.
"You're not treating people equally," said Bill Thompson, professor of public administration at UNLV.
Thompson believes the tax could be simpler and should not exempt anyone.
"It's a cowardly tax when you've allowed half the people not to pay it. If it's a good tax you don't need to have exemptions," he said, referring to Guinn's statement that 60 percent of all businesses in the state Would be exempt from a gross receipts tax with a $450,000 exemption level.
Thompson recommends that all businesses pay 3 percent on the taxes they pay to the federal government on their profits. With the tax paperwork already in place with the federal government under his idea, he said the collection process would then be simplified.
"This plan nickel and dimes people and it's unclear," he added about Guinn's tax proposals.
Tim Cashman, owner of Las Vegas Harley Davidson, a Valley chain of motorcycle dealerships, also discussed the impact a gross receipts tax will have on lower may-gin businesses like his. Cashman estimates that car dealerships operate on about a 15 percent margin and because his motorcycle dealership also sells other retail products, his margins are better. But they are still pretty slim.
"It would have a definite impact on our business and all retailers. But until the actual bill language comes out, then we'll really see the impact," he said.
Cashman also said that a gross receipts tax is "counter-intuitive to typical business or economic theory."
"In the development of any business you want to grow revenues and growing revenues is important so that you can employ more people and generally be more successful. But a gross receipts tax is penalizing a business owner for wanting to grow his business," he said.
Cashman is not against taxing local businesses and feels even a gross receipts tax can work. But he said a "variant" gross receipts tax that takes into a company's profit margins would be a better route.
But in a not-so-typical position, Cashman said lie is not opposed to tripling the current $100 "head tax," or the annual fee lie pays on each of his 145 employees.
"From my standpoint I make the decision to hire someone by how much revenue they can generate or how much work or effort that person can provide in the organization. ... Three hundred dollars is not a whole lot of money as it relates to salary or even how much they might produce. That (tax increase)'s not going to stop me from hiring them," he added.
But the proposed 50 percent increase on incorporation filing fees, also known as "Secretary of State fees," has one business sector bristling.
Cort Christie, CEO of Nevada Corporate Headquarters Inc., a business consulting firm providing resident agent and other business services specifically to companies incorporated, but not located Nevada, said the 50 percent jump could be enough to sway the small, but crucial sector, away from the economy.
Non-resident incorporators made up about 80 percent of the 52,000 incorporation filings in 2001, according to Christie's analysis of the Secretary of State's Commercial Filings Division.
Low corporate filing fees and no business taxes have been Christie's selling point for the Silver State for these usually one-person operations who typically come to Las Vegas a few times a year, bring tourism dollars and employ about 1,000 people locally through resident agent companies like Christie's. Now these companies will likely look elsewhere.
"These are people who have options, and as their consultant, I must make them aware of those options," he said. Christie listed Wyoming, Delaware, Colorado and Florida as examples of states with lower filing fees.
Christie, who is also the vice president of the Nevada Resident Agent Association, will propose an actual reduction of initial filing fees to the Legislature to promote more economic activity in the state. He said the state can then gain additional tax revenue with "back end" fees after companies have already incorporated in the state. Under his plan, Christie believes the state could bring in an additional $23 million in revenue, instead of potentially losing the approximately $34 million in tax funds the industry brings into the state annually.
At the same time, local businesses appear receptive to education funding.
Jerry Stanley, president of Soil-Tech, a local firm that provides dust mitigation services for developers in town, estimates his business would take about a $25,000 hit annually from the gross receipts tax alone.
"That's a whole bunch of money for me personally, but if I knew that it was going toward education I wouldn't have a problem with it," he said. "I know that's where this town suffers dearly."
Cashman also said he understands the connection between a better education system and economic diversification as well as creating a qualified workforce. But he expects accountability to be a top priority for the school system if businesses are going to be chipping in more money.
But what was perhaps more common among business owners was either a lack of knowledge of the subject or an unwillingness to respond to the issue. Many wanted to wait and see how the legislative session unfolded before they spoke.
Greg Bortolin, a spokesman for Kenny Guinn, said the governor will keep his options open in the legislative session, and will consider alternatives brought forth from the business community.
"I think the Governor is famous as a consensus builder... Is he married to (this plan)? No. Is lie firm about the amount of money that needs to be raised? Yes," said Bortolin.
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