Tax-break bill for employers would bring costs to state

CARSON CITY -- A bill designed to give a tax break to employers who hire unemployed workers ran into trouble Thursday when state officials said it would force costly changes in how they track company payrolls.

Assemblyman Steve Brooks, D-Las Vegas, proposed in Assembly Bill 443 to exempt companies from paying the state's current 1.17 percent payroll tax on the wages of unemployed workers they hire after July 1.

But Acting Taxation Director Chris Nielsen said his agency receives only total wages from companies, not the numbers and names of their workers.

"We will be submitting a fiscal note," he told members of the Assembly Taxation Committee. "We will need (computer) system modifications and there will be some costs. I don't know what they are yet."

He said his agency would have to do more detailed audits of companies to make sure they are properly following the bill's intent.

Brooks was disappointed by Nielsen's statements because the general thinking this session is any legislation that forces more costs on state government will die.

"That's how the legislative process works, Mr. Brooks," said taxation committee chairwoman Marilyn Kirkpatrick, D-North Las Vegas.

She also warned Brooks that even if the bill wins committee approval, it still must be forwarded to the Assembly Ways and Means Committee because it affects state budget funds.

Kirkpatrick, however, said the first-year tax savings a company would receive would be about $600 per additional employee.

Under the bill, the second-year savings on these new employees would be half the first year. Then in the third year, employers would pay the full payroll tax.

But Assemblyman Ed Goedhart, R-Amargosa Valley, said legislators could give employers even bigger savings if they let the payroll tax return to previous levels.

The payroll tax was nearly doubled in 2009 by legislators. Its previous rate was 0.63 percent of wages. That rate will return on July 1 unless legislators vote to extend it. It is among about $800 million in temporary tax increases that are set to expire.

A line of business lobbyists testified in favor of Brooks' bill, including members of the Reno-Sparks Chamber of Commerce and the Retail Association of Nevada.

Brooks testified that 10 states in the last year have passed bills to give companies incentives to hire unemployed workers. But in response to questions, he could not give information on the benefits of those laws.

With its 13.6 percent unemployment rate, Nevada "doesn't have the luxury of waiting" for its economy to turn around, he said.

"This bill is a step, a small step perhaps, in the right direction," Brooks said.

Assemblyman John Ellison, R-Elko, said he employs about 10 people and didn't think the bill would be hard to implement.

"It's not a big deal," Ellison said. "It's a matter of tracking (employees)."

Brooks said he would work with the Taxation Department and others in an effort to modify his bill and win committee support.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.