MINUTES OF THE
SENATE Committee on Taxation
Seventy-second Session
May 27, 2003
The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 3:09 p.m., on Tuesday, May 27, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Mike McGinness, Chairman
Senator Dean A. Rhoads, Vice Chairman
Senator Randolph J. Townsend
Senator Ann O'Connell
Senator Sandra J. Tiffany
Senator Joseph Neal
Senator Bob Coffin
STAFF MEMBERS PRESENT:
Rick Combs, Fiscal Analyst
Ardyss Johns, Committee Secretary
OTHERS PRESENT:
Kathy Augustine, State Controller, Office of the State Controller
Dennis Colling, Chief, Administrative Services Division, Department of Motor Vehicles
Chairman McGinness:
We will open this meeting of the Senate Committee on Taxation. Our State Controller, Kathy Augustine, wants to clarify more concisely her issue on debt collection regarding Assembly Bill (A.B.) 481, which we heard in this committee yesterday.
ASSEMBLY BILL 481:Makes various changes concerning state financial administration. (BDR 31-101)
Kathy Augustine, State Controller, Office of the State Controller:
I understand there was either a misunderstanding or maybe some misinformation in the committee meeting yesterday. I brought Dennis Colling from the Department of Motor Vehicles (DMV) with me to help clarify the cost to the State if we do not remove the sunset clause in this bill. As you know, 2 years ago we started a pilot program of suspending licenses of vehicle registrations for those people who had given bad checks to the State. I understand there was a question yesterday as to why those should be suspended. I will let Mr. Colling hopefully clarify, and I can answer any other questions the committee might have.
Dennis Colling, Chief, Administrative Services Division, Department of Motor Vehicles:
The pilot program we are discussing involved the DMV and the Division of Wildlife. The Division of Wildlife notifies us of people who have written them bad checks. We then place a flag on the registration and driver’s licenses of those individuals. We just flag them, not actually suspend them. When those individuals come in to renew their registration or their driver’s license, we notify them they need to go back to the Division of Wildlife and take care of their bad debt. When we are provided proof the bad debt had been paid, we then register their vehicle or allow them to renew their driver’s license.
In conjunction with this and laws passed by the previous Legislature, the department was granted the authority to do the same thing for anyone who has written a bad check to the DMV. Approximately $1.1 million to $1.2 million per year are written in bad debt to the DMV. We have been able to process that in the past few years because we have insisted they take care of the bad debt prior to renewing their registration or driver’s license. We have managed to collect not only the base check itself, but with added fees and penalties we actually collect more dollars than have been written to the department on the first bad check.
Chairman McGinness:
Has this been a positive program for the DMV?
Mr. Colling:
Yes, it has. For the state as a whole, the money we collect is also a part of the government services tax money that goes to the cities, counties, and school districts. We back that money out when a bad check is issued and then we put the money back in when we do the actual collection of the checks.
Senator Tiffany:
Do you think it will be a problem if we extend this to all the professional licenses, real estate licenses, hairdresser licenses, etcetera? The list could potentially get pretty long. You then become the point of contact for the collection to actually happen. Do you perceive that as a problem for someone at the window? In other words, I would not want our window to slow down another 20 minutes of processing because of the laundry list potential.
Mr. Colling:
If the DMV were to become the point of collection, the answer is absolutely yes.
Senator Tiffany:
I should not say collection, I should say the point where they know they have to go to clear up a debt.
Mr. Colling:
They do not come to our office to clear up the debt. We send them away to clear up the debt.
Senator Tiffany:
We are not communicating. Suppose it is someone who has not renewed their real estate license, but they come to the window to get their driver’s license or their car registration. You then turn them away because you see they wrote a bad check for their real estate license. That is what I am talking about.
Ms. Augustine:
Those people who have given us a bad check for their real estate license would have their real estate license flagged, not their DMV license and registration.
Senator Tiffany:
I thought we had gotten into the conversation where we were going to go as far as withholding a persons driver’s license if a bad check had been written to any state agency.
Ms. Augustine:
I think that was the misunderstanding with the committee yesterday. Not everything is going through the DMV. We started this program with the DMV in December 2001. They turned over 6000 bad debtors to us who had given the DMV bad checks. In the first month, my office personally collected over $55,000 in DMV bad debt. We have since turned over $5.6 million in DMV bad debt to Outsourcing Solutions, Incorporated. They have now collected $1.4 million through the flagging system of the registration and driver’s license.
The Division of Wildlife was included in the pilot program because they were not yet automated to do it themselves, which is why those accounts have been turned over. We are not going to have every professional licensure go through the DMV for the suspension. We are going to flag those licenses for that particular entity.
Senator Tiffany:
If we renew the pilot, it would include the fishing license. If you have passed a bad check for your real estate license, for example, there would be no connection with that and your driver’s license.
Chairman McGinness:
If we want to reconsider, it will standardize the bad check fee of $25 and remove the sunset clause, giving the controller the authority to continue these programs.
Ms. Augustine:
Yes, and if the committee sees fit and uses the language, we would be allowed to extend the flag to all agencies who are receiving bad checks on professional licensures.
Chairman McGinness:
Do those agencies have the authority to allow you to do that now?
Ms. Augustine:
No.
Senator Neal:
I think we are right back where we started according to what I am hearing. I thought we were going to extend the sunset to two agencies, the Division of Wildlife and the DMV. Now I hear we are extending it to all departments.
Chairman McGinness:
The motion I would accept would be to remove the sunset to allow the pilot program to continue and to standardize the bad check fee to $25.
Senator Neal:
Okay, and we are not extending it to any other agency other than the two agencies mentioned.
Chairman McGinness:
Not at this time.
SENATOR RHOADS MOVED TO ADOPT THE PROPOSAL TO REMOVE THE SUNSET PROVISION AND STANDARDIZE THE $25 BAD CHECK FEE FOR THE OFFICE OF THE STATE CONTROLLER.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Chairman McGinness:
If you look at your Senate Taxation Revenue Plan (Exhibit C), there is no revenue shown for property tax. Senator Townsend, the motion we took was to include the idea you brought forward regarding the property tax. You later asked that the effective date be changed to July 1, 2005, but the committee never took action on it. Could you make a motion at this time?
Senator Neal:
I do not fully understand the situation.
Chairman McGinness:
When Senator Townsend brought forth his property tax idea with the $70,000 exemption, it was to become effective July 1, 2004. He would like to move the effective date to July 1, 2005.
Senator Townsend:
I want to change it to accommodate the assessors and the treasurers who will be responsible for this in each county. They need to be given an appropriate amount of time. Given the relationships they have with the vendors who provide the software programs for many of these, they have assured me if you call a vendor tomorrow to come in and change a software program, the vendor can pick any amount they want to charge. But if it is part of an overall change in a program, it can be phased in. It drops the cost to the local government as much as possible.
I believe a technical committee should be put in place to work with the assessors, treasurers, vendors, and the Department of Taxation in the interim to make sure this effort is dealt with from a technical point of view.
SENATOR TOWNSEND MOVED TO CHANGE THE EFFECTIVE DATE IN HIS PROPERTY TAX PROPOSAL TO JULY 1, 2005.
SENATOR RHOADS SECONDED THE MOTION.
Senator Rhoads:
Was your rate 33 cents?
Senator Townsend:
The way this is structured is very simple. You have to apply any change equally and across-the-board. We attempted to do this at the current level, but when you applied an exemption of $14,000 across-the-board, it affected local government, including the school district, which was never the intention. If you took the simple current rate and applied it after your assessed valuation, when you went across-the-board with a $14,000 deduction, the amount of revenue lost before you could let your rate float up at the local level would kill your local school support tax and any of your local revenue, particularly in the rural counties. If you leave the current structure and current rates in place, you can go to a separate category and then you could go up to a $70,000 across‑the‑board exemption, which includes all property whether it is residential, commercial, or industrial. Anyone who has a property value of $200,000 or less would have a hold harmless clause. Those who had property valued at up to $366,000 would be held at the same rate the Governor proposed, which was 15 cents. Then there was a 1-cent add-on for capital improvement programs. Then you could go at $70,000 so the rate then floated up to 33 cents.
Senator Rhoads:
How much did that proposal raise?
Senator Townsend:
It was approximately the same as the Governor’s at $93 million.
Senator Neal:
Would it not be easier to raise the gaming tax? It would be much simpler.
Senator Townsend:
If you are interested, I would be glad to show you the exact figures of every gaming property and what they would pay under this additional property tax. Even you would be shocked at the number. I want everyone to understand; this is about the mistake we made 20-plus years ago when we cut the property tax in half. This is about recapturing some of that. This is our most stable funding source for all of our educational components. Larger net worth individuals and higher income property levels pay a substantially higher price while the average Nevadan is held harmless.
Chairman McGinness:
There has been a motion and a second to make the effective date of the property tax proposal July 1, 2005.
THE MOTION CARRIED. (SENATORS O’CONNELL, TIFFANY, AND NEAL VOTED NO.)
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Senator Tiffany:
Since that passed, are we going to take a vote today on the Senate Taxation Revenue Plan (Exhibit C) as our tax bill?
Chairman McGinness:
We have reached consensus on these items and it would be my intention to take a motion on this core package as it exists today with the realization that there are other components. Senator Townsend has indicated he has some issues and I think Senator Neal has one or two. There are other members of this body of the Senate who have also indicated they have amendments they would like to bring forward. We have reached consensus on this package. I think we realize it falls short of matching the spending forecast by some other committees. How far short depends on your point of view. Since Senate Bill (S.B.) 238, section 188, includes the money for the Department of Taxation, I think the appropriate motion would be to amend and re-refer.
SENATE BILL 238: Provides revenue in support of state budget. (BDR 32-1208)
Senator Townsend:
Do we want to send it to Senate Finance, or do you want to take out that part?
Chairman McGinness:
We could take it out, which I think was part of our discussion yesterday. Do we take out the money part? By doing so, we could just move to amend and do pass. We could amend the bill with everything the committee has done on this Senate Taxation Revenue Plan (Exhibit C). We could also remove section 188, which is the money for the Department of Taxation. Senators Tiffany, Rhoads, and Coffin sit on the finance committee. Has that been addressed in the money committee?
Senator Tiffany:
I think we are going to include it in the appropriations bill. I think it is appropriate to take it out of this tax bill because it does not belong there and we definitely have a vehicle for it in the finance committee.
I do not intend to vote on anything having a property tax in it. I have never liked a property tax and I will vote against one every time. I do not want to hold this bill up or vote against it in its entirety. That is kind of where I am; “Damned if you do and damned if you don’t.” Just for the record, I do not approve of the property tax in this bill. I am going to vote with the committee to get the bill out, but I will bring an amendment on the Senate Floor to remove the property tax.
Chairman McGinness:
You are absolutely welcome to do that. I think Senator Townsend talked about sending this to the Legislative Committee for Local Government Taxes and Finance so they could take a look at it. Then, as the session opens in 2005, that technical committee might have some idea or some recommendation on whether to tweak it or take it out. All of those possibilities exist. However, I understand you comments.
Senator O’Connell:
I feel the same way Senator Tiffany feels.
Senator Rhoads:
I believe this committee has gone about as far as we can go and we are probably getting stale. We have voted on everything we can agree on and there are a lot of things I know are out there I could still even vote for myself. Just because any of us vote for some of these things in this package we put together does not mean we cannot moderate it when we go down to the Senate Floor and make the final vote. We can change it. So with that, I would like to move a do pass for the Senate Taxation Revenue Plan (Exhibit C) we have in front of us, which is a synopsis of S.B. 238.
SENATOR RHOADS MOVED TO AMEND AND DO PASS S.B. 238 AS AMENDED.
SENATOR O’CONNELL SECONDED THE MOTION.
Senator Tiffany:
Could I ask one more question on this property tax? It sounds like this $93 million is not going to be included in this total of $558 million.
Chairman McGinness:
No, it is not.
Senator Tiffany:
The $93 million will not be in this as a revenue source for this biennium?
Chairman McGinness:
No. Its effective date is moved to July 1, 2005.
Senator Coffin:
I have not missed a meeting on this and I have made a pretty good record of the votes that have taken place. It is an interesting concept because what you have is a conglomeration of different taxes. Only a couple of the smaller ones had unanimous votes. They were generally split votes, so Senator Tiffany is not alone when she is voting to send out a package for which she did not entirely vote. It is kind of a unique approach. We did this from scratch. We did not have lobbyists writing the script for us. We did it, Mr. Chairman, under your initiative and I appreciate that very much. So, I will support the move. I do not necessarily feel that sending it to Senate Finance is a good idea.
Chairman McGinness:
With this motion, it will not be sent to Finance.
Senator Coffin:
Okay, because that would be abandoning our duties since we may come up with other ideas. We do not want to turn that gavel over to them. At the same time, everybody has something in here and every member of this committee has voted for some taxes. Certainly one could claim he or she did not vote for a particular tax, which is their business in their own constituency but we are still short of money. This is not all we are going to need. On the other hand, I will support it as a measure to get us most of the way there.
Senator Neal:
I still have some misgivings about the proposal. I think we have not stepped up to the plate to deal with gaming in making it pay its fair share. Of all of the money they receive in their drop boxes and slot machines, we are just tapping them for $35 million in 2004 and another $39.8 million in 2005. I do not think the public understands this industry. If they did, they would not stand for the fact that we have not insisted this industry pay more money. I realize any of us will have the option on the Senate Floor of bringing forth an amendment to increase this particular tax. I brought before this committee certain factual statements indicating this industry should pay more than the 6.25 percent they are now paying.
As I have indicated, adding a forth tier of $1 million, and only raising the tax to 6.75 percent does not cut it in my judgment. We are going light on this industry and according to polls I have seen, we are not meeting the demands of approximately 67 percent of the people of this state who have indicated they want the gaming industry to pay more. It seems to me this process has been hijacked in terms of not allowing gaming to pay its fair share. Now we are moving it to the Senate Floor where we will have to try to fight this out.
I have taken this to the floor before in the last session, and the session before, and this Legislature refused to act. Now we are at crunch time and we have to do something but that something does not seem to include gaming. As I look at the number of proposals we have, we are going after average Joe Citizen to make up this billion dollars we need while just touching gaming ever so lightly.
The other day, a colleague showed me a report indicating other states that have dealt with the taxing issues which seem to refuse to deal with taxing issues other than gaming. There were about six or seven states that have dealt with this particular issue. We need to stand up and recognize the problems this industry causes with the number of people it brings into this state. It brought some 47 million tourists last year to our population base of about 2 million people. There is a tremendous cost to that base population when we do not reach into the coffers of gaming and extract the money necessary to take care of roads, health care, police protection, and other things associated with bringing tourists into this state. Seemingly, we refuse to look at it from that particular standpoint. As a result, we are not going to cure the problem of not having the money necessary to take care of the needs of this state.
We need to tax gaming based on the problems it creates. We have not done that in this proposal and therefore, I will be voting against it. If we are able to include any amendments I might bring to the Senate Floor, then I will change my mind and support it.
Senator Coffin:
This is probably the first time in his 30 years Senator Neal has paid attention to popular opinion polls and cited them as the reason for voting. Usually, he ignores those and follows his guiding star. I think it is more likely he is following his guiding star here and not the polls. If we relied on the polls to make our votes, naturally we would try to get $400 million or $500 million out of gambling. We are getting $75 million out of gambling from the get-go on the gross tax and then probably some more in various ways. The gaming industry has to buy a lot of liquor, a lot of cigarettes and a lot of entertainment so they are going to be paying some, but maybe it is not enough.
There are probably some casinos who could afford 2, 3, even the 4 percent Senator Neal has proposed on their gross revenue and still survive nicely. However, the ones I think about are the ones in the districts I represent in downtown Las Vegas that cannot afford it. We have casinos down there behind in their payments and barely making payroll, so I am not standing up for the casino industry. You would not want to stick any one industry with the bill here. I do not agree when you claim they cause all the problems. “Undoubtedly, people who come to the towns and seek a quick job figure they can somehow get rich quick with a job in a casino and sometimes that happens.” I think our problems are typical of any community of nearly 2 million people and not necessarily caused by any one industry.
I will continue to support this proposal and if it looks like we can do more in that venue, I may support it. However, we have to analyze whether or not a flat tax is the way to tax anybody anymore. I have thought for years now all of these taxes ought to be going in the net venue. We cannot do that this year, but we ought to be thinking about net for anybody, including gaming, because it is not like it used to be. The good old days are gone, and they have to fight hammer and tong with other states, tribes, and countries for their business. They have to fight to preserve the jobs they provide for people, which are pretty good jobs.
I will disclose for the hundredth time at least, as an insurance broker, I have a client who is in the gaming business and they do pretty well. They might even be able to afford what Senator Neal has proposed, however, most of them cannot. That is the problem with his proposal. I am going to continue to support forwarding S.B. 238, as amended to the floor, even though I do not like some of these taxes and I did not vote for all of them.
Senator Neal:
I made my statement without interjecting anything personal but the good senator on the end decided to make light of some of the comments I have made. I would think if he believes in his position, he would like to carry it to the voters in his next election. When we look at the taxes these industries pay to operate in other states, the tax they pay in Nevada is the lowest. They are utilizing our low tax base to support the higher taxes in other states. If you look at casinos operating in Illinois, Louisiana, Mississippi, and many other states, they are the same casinos operating here in the State of Nevada.
I have heard some arguments regarding Indian gaming. Individuals who operate in this state are operating Indian gaming. Those people who live here in the north know about the Station Casinos right across the state line. Those who have made trips to San Diego know about Harrah’s operating there on the Indian reservation. Our taxes are even lower than those being paid to the state of Mississippi. They collect something on the order of about 11.25 percent. We allow casinos to operate and take money from our public and generate problems like addiction to gaming, yet we do not see that they should be taxed to take care of those particular problems.
As I have indicated in my testimony before this committee, the University of Nevada, Las Vegas, produced a report just this year indicating that gaming addiction in Las Vegas alone costs the state between $300 million and $459 million per year. That is just in Las Vegas. We are not talking about Laughlin, Stateline, Lake Tahoe, Reno, or Elko. When you add in all of those, you will see the gaming addiction rate would run pretty close to $1 billion a year. Yet, we are not even addressing those particular issues because we do not see it in terms of its relationship to gaming unless the gamers themselves are pointing it out. But just let me tell you, the other night I was sitting at home and I saw a gentleman from one of the major casinos giving a statement on television regarding gaming addiction. This is the first time we have seen that in this state. It is a problem.
More than 8 years ago I said it was a problem, but we do not want to address those particular problems. When you bring in 47 million people on a base population of 2 million, there is a cost to those 2 million people. So, let us not try to hide behind the notion that gaming is paying its fair share when it is not. They use their money to invest in foreign countries. Think about it. They had to pay a social cost to build those casinos in Maori. They had to put out something like 40 percent of what they make to cover the social costs, but that did not stop them from investing.
In the State of Illinois, the governor, who was a republican, recognized the social cost of gaming. In Illinois, gaming revenue of over $250 million is taxed at 50 percent. We did not see those casinos in Illinois pack up and leave. No, they paid the money. But we sit here and allow them to get away with paying virtually nothing. We try to shift all of the expenses caused by the problems gaming creates to those who buy cigarettes and liquor, to those who pay property taxes, and to those individuals who have restricted slot routes.
Ladies and gentlemen of this committee, I think we are doing a disservice to the public when we do not stand up and say, “Gaming, you have got to pay what it costs you to operate in this state.” That is all we ask for and that is all I am asking for.
Chairman McGinness:
As I indicated when we started this process, everyone’s vote and amendments are their own when they get to the Senate Floor.
THE MOTION PASSED. (SENATOR NEAL VOTED NO.)
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Chairman McGinness:
We have had another bill referred to us so we will post a meeting for Thursday at 1:30 p.m. We are adjourned at 3:49 p.m.
RESPECTFULLY SUBMITTED:
Ardyss Johns,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: