Gaming, mining industries tell tax panel to look elsewhere

CARSON CITY -- Gaming and mining leaders told legislators Thursday that their industries have been hard hit by the recession and cannot afford to be targeted for tax increases as a way to bail out state government.

They told a joint Senate-Assembly taxation committee that they would support a "broad-based" tax paid by all businesses, but not one paid by just a few.

Business profits or income could be taxed, they said, or the current modified business tax could be increased. Nevada businesses now pay a 0.63 percent tax on each employee's wages.

The Progressive Leadership Alliance of Nevada, a consortium of 30 liberal-leaning organizations, said doubling the modified business tax would raise $279 million a year and that a 7 percent tax on businesses earning more than $100,000 a year, would fetch $200 million a year.

Taxation committee members made no decisions on new taxes at the hearing, the first called to let businesses, citizen groups and average citizens offer their suggestions on how to lift state government out of its financial difficulties.

"We are tightening our belt," said Assembly Taxation Chairwoman Kathy McClain, D-Las Vegas. "But all these services cost money. We don't have slushes in this budget."

After hearing business associations and others support tax increases, Assemblyman Tom Grady, R-Yerington, released a packet of headlines from newspapers over the past month showing how companies are laying off workers and suffering financial problems. He said he wanted to show that economic problems are affecting much more than state government.

Reno businesswoman Kim Bacchus testified if new taxes are imposed on business, then she and her husband will have to lay off some of their eight employees.

"What you are doing to me and our family is asking us to shoulder the state's inefficiency in spending. Please do us no harm," she said.

"All we have heard is how you need to raise taxes or increase revenue," added Wayne Smith, representing the conservative Nevada Action Coalition. "You are like a board of directors. You can decrease expenses."

But after hearing another witness call for spending cuts, not tax increases, an irritated Assemblywoman Ellen Koivisto, D-Las Vegas, asked:

"What elementary schools do you want us to close? What middle schools, what high schools should we close because there is no money?"

Even the Las Vegas Chamber of Commerce, the powerful Southern Nevada business lobby, has concluded that a tax increase of some sort is going to be needed to fund the next biennial budget. Steve Hill, the chamber's president, told the committee that the chamber would support such an increase as long as it is coupled with reforms to public employee retirement benefits.

"Without those reforms, we will find ourself right back in the situation we find ourselves in now, and without those reforms, we will not be able to support revenue increases that will prove to be nothing but a short-term fix," Hill said.

The reforms proposed by the chamber would mainly affect only new government hires, he said. "We do not think we should break the promises made to current employees," he said.

Hill didn't get more specific about what kind of tax increase the chamber would prefer to see.

In releasing his budget in January, Gov. Jim Gibbons proposed state general fund spending of $6.17 billion over the next two years, about 9 percent less than the biennial budget lawmakers approved two years ago.

The governor's budget has been condemned by many legislators, educators and state employee groups, particularly the 36 percent reduction in state support for higher education and 6 percent cuts in salaries for state employees, teachers and university professors.

Without the cuts, however, Gibbons said the state must lay off 10,000 workers or legislators increase taxes, options he opposes.

Democratic leaders have pledged to wait until a review of all state budgets is completed before they propose specific tax increases.

Some of the more troubling testimony during more the more than five-hour hearing came from Nevada Resort Association President Bill Bible.

Bible said most gaming companies have laid off employees and reduced contributions to employee benefit plans.

Some major resorts are on the verge of declaring bankruptcy, he added.

"These companies don't have a great deal of latitude in changing their business models. It is a perilous proposition to rely too heavily on one industry. Nearly half of the general fund revenue, directly or indirectly, comes from the gaming industry."

He added legislators should "apply maximum scrutiny to expenditures."

Still, Bible said the gaming industry would support a board-based business tax that applies to all businesses.

Tim Crowley, president of the Nevada Mining Association, said his industry employs only 12,000 people, but pays an average of $14,000 a year in taxes on each one.

But the industry does not object to a fair, broad-based business tax that applies to the "entire business community," he said.

In supporting a business profits tax, PLAN state director Bob Fulkerson showed newspaper advertisements for Walmart, Target and Best Buy.

The prices in the advertisements were identical, though the advertisements came from Michigan, Sacramento, Utah, Oregon and Nevada.

He said Walmart is selling items for the same price in Reno as in Sacramento, even thought there is nearly a 9 percent business tax in California and none in Nevada. The same is true for the other states, he added.

"Why don't we get a break in Nevada, where they pay nothing?" Fulkerson asked. "Where is our money going?"

Staff writer Molly Ball contributed to this report. Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.