MINUTES OF THE Meeting

of the

ASSEMBLY Committee on Taxation

 

Seventy-First Session

February 27, 2001

 

 

The Committee on Taxationwas called to order at 1:30 p.m., on Tuesday, February 27, 2001.  Vice Chairman Roy Neighbors presided in Room 3142 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Mr.    Roy Neighbors, Vice Chairman

Mr.    Bernie Anderson

Mr.    Morse Arberry Jr.

Mr.    Greg Brower                                                          

Mr.    David Brown

Mrs.  Vivian Freeman

Mr.    John Marvel

Mr.    Harry Mortenson

Mr.    David Parks

Mr.    Bob Price

Ms.   Sandra Tiffany

 

COMMITTEE MEMBERS ABSENT:

 

Mr. David Goldwater (Excused)

 

GUEST LEGISLATORS PRESENT:

 

Assemblyman Tom Collins

 

STAFF MEMBERS PRESENT:

 

Ted Zuend, Fiscal Analyst

Kathryn Ely, Committee Secretary

 

 

 

OTHERS PRESENT:

 

Ms. Carole Vilardo, Nevada Taxpayers Association

Ken Lange, Executive Director, Nevada State Education Association

Ray Bacon, Nevada Manufacturer’s Association

 

 

Vice Chairman Roy Neighbors called the meeting to order and advised that no action would be taken on A.B. 53 because Chairman Goldwater was absent.   Mr. Neighbors requested Mr. Ted Zuend, Fiscal Analyst to provide a historical background before opening the hearing on A.B. 53. 

 

Mr. Zuend explained the business tax was passed in 1991 as part of a substantial tax package.  It was only a part of the package and, at that point in time, raised approximately $50 million. The sum was now up to $80 million and as a result, the Governor proposed a business activity tax against the payroll of businesses, as well as a business license fee. He stated the business license fee was designed to raise $280 million.  The legislature substituted the business license fee tax, as well as a three-quarter percent in the local school support tax, to fund the program the Governor had called for.  The tax was substantially changed in 1993 to a “head tax” and a cap of $100,000 per quarter that applied only to a few corporate casino operations.  The cap was eliminated in 1993.

 

Mr. Neighbors opened the hearing for testimony on A.B. 53.

 

Assembly Bill 53:  Repeals business tax under certain conditions. (BDR 32-830)

 

Assemblyman Tom Collins explained the reason a request had been made to repeal the business activity tax was because in 1991 when the business activity tax was created, it was a compromise tax, or a “deal” made ten years ago.  In 1993, the tax was expanded to eliminate the cap.  He stated the point for the requested action to repeal the tax was because he believed Nevada had come to the point as a legislative body, with the support of the community, the entire state and the Governor’s Office, to change the tax structure to address the needs of the citizens of Nevada.  Based on that, Mr. Collins explained that it was not his intent to put small business owners in a “double paper shift thing,” that would require the small business owner to fill out several forms.  Mr. Collins stated that as a union hand most of his life he had received good wages and benefits.  Mr. Collins stated he felt that an employee deserved to draw good wages and benefits so they could contribute to the community and pay taxes. He also stated his strong belief that if an employer could not offer good wages and benefits it should not be in business.  Mr. Collins stated the purpose for deleting the business activity tax was to provide ample and adequate revenue to eliminate the double paperwork and double tax situation placed on businesses. 

 

Ms. Carole Vilardo, Nevada Taxpayers Association stated the problem with A.B. 53 was two-fold.  She stated the only way the business tax would be repealed was if the Nevada Fairness and Quality School Funding Accountability Act was enacted and the language was very specific as to the conditions and the dates.  In Section 18, all that would be repealed was the business tax and was dependent on the passage, either by the legislature, with approval from the Governor, or if it was submitted and approved by the voters at the general election in 2002.  She explained the problem would be the funding provisions in the teachers’ initiative that had dedicated revenue to education.  The Nevada business tax was General Fund revenue.  Ms. Vilardo stated, “so you repeal one set of revenue for another set of revenue, but they don’t go to the same place and that gives you a major problem.”  She concluded the bill was a replacement and it does not appear to balance out each other given the uses both are put to.

 

Mr. Anderson asked if the primary concern was the lost revenue to the General Fund.  Ms. Vilardo responded in the affirmative.

 

Mr. Collins apologized to the committee and Ms. Vilardo for an oversight in reviewing the draft of the bill.  He stated Ms. Vilardo was correct in that the intent was the exception would be the initiative tax, or another general tax and the bill did not reflect his intention.  The intention was to create another general tax to the General Fund.

 

Mr. Anderson asked where could that source of revenue be identified so that it could be put it into the General Fund.

 

Mr. Collins responded one example would be from the revenue generated from the 4 percent tax on a business net above $50,000.  That revenue would go to the General Fund and not be earmarked to the education society.  Mr. Anderson asked Mr. Collins if he perceived that might dwindle the amount of money in the General Fund appropriated for other programs that are currently funded.

 

Mr. Collins responded should Nevada pass a tax that would generate $250 million to $300 million, the sum of $80 million would be subtracted so that businesses were paying one simple tax instead of multiple taxes.  Mr. Collins stated that whatever was passed, make it big enough to offset the $80 million deduction and keep it simple for businesses in Nevada to operate. 

 

Ken Lange, Executive Director of the Nevada State Education Association (NSEA) stated NSEA opposed A.B. 53.  He stated when projected revenues from the net business profits tax were made and the percent was set at four, it was anticipated there would be a tremendous amount of pressure on school districts to allocate the money effectively. Consequently, the diminishment of that amount by any number whatsoever would make it more difficult to cover school programs.  For example, the educational technology currently required $108 million in expenditures to bring Nevada up to an adequate standard for technology in the schools.  Another example was special education and Mr. Lange explained that to fully fund special education required well over $1 million.  He stated it took $5 million just to give each student in Nevada a $15 textbook and teacher salaries were about $14.6 million dollars.  He stated the $250 million was under tremendous pressure already without diminishing it further.  Mr. Lange stated NSEA recognized that the business tax was a regressive tax and a creature of compromise and had not lived up to expectations in terms of revenue delivery.  However, at this point in time, it was premature to set up, in effect, a “trigger” that made one tax go away if another was passed.

 

Ray Bacon, Nevada Manufacturer’s Association stated he wanted to place on the record that the Nevada Manufacturer’s Association agreed with the comments made by Ms. Vilardo. 

 

Mr. Neighbors adjourned the meeting at 2:05 p.m.

 

 

 

 

RESPECTFULLY SUBMITTED:

 

 

 

           

Kathryn Ely

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Assemblyman David Goldwater, Chairman

 

 

DATE: