MINUTES OF THE
SENATE Committee on Taxation
Seventy-second Session
May 30, 2003
The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 6:25 p.m., on Friday, May 30, 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
COMMITTEE MEMBERS ABSENT:
Senator Bob Coffin (Excused)
STAFF MEMBERS PRESENT:
Rick Combs, Fiscal Analyst
Mavis Scarff, Committee Manager
Gale Maynard, Committee Secretary
Chairman McGinness:
There are a number of issues to discuss during this meeting. We did amend and do pass S.B. 238, which is the Governor’s bill to provide revenue for the budget.
SENATE BILL 238: Provides revenue in support of state budget. (BDR 32-1208)
In order to make the changes to provide the amount of tax revenue needed, we need to rescind our action and make the necessary changes to provide that revenue. If the committee will look at the “Senate Taxation Revenue Plan” (Exhibit C) this is the action we have taken.
Senator Neal:
Has the bill been reported to the floor?
Chairman McGinness:
The amendment is being drafted. Our first action should be to rescind our previous action.
SENATOR RHOADS MOVED TO RESCIND THE PREVIOUS ACTION TAKEN ON S.B. 238.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR COFFIN WAS ABSENT FOR THE VOTE.)
*****
Chairman McGinness:
In the document “Senate Taxation Revenue Plan” dated May 27, 2003 (Exhibit C), the totals are $200 million in the first year of the biennium and $358 million in the second year of the biennium. The Senate Committee on Finance closed their budget at $860 million. There is a difference of approximately $300 million. We propose to correct the deficit by the live entertainment tax. Originally we proposed 8 percent, which will be increased to 10 percent. The 35‑cent increase in the cigarette stamp fee in 2004 will increase to a 40-cent increase in 2005.
On the document titled “Comparative Payroll Tax Rates-[Implemented January 1, 2004]” (Exhibit D), there are a number of rates in the column titled “Rate on Base Wages” starting with 1 percent through 0.25 percent; this would be a payroll tax on base wages over $21,500 per month. All employers report to the Employment Security Division. There would be a 0.25 percent on each employee for each year. This would yield $23.3 million the first 6 months starting January 1, 2004. For wages that exceed $21,500 per month, the rate would be 1.29 percent for a yield of $84.9 million and a combined yield of $108.2 million. We believe the lower rate will produce the revenue required.
Considering the cost, if you look at the last figure in the “Yield on Base Wages” column, $53.75 is for 6 months, the total cost per year would be $107.50.
Coupled with the repeal of the business activity tax (BAT), which would expire when the payroll tax takes effect, the BAT was costing employers $100 per employee and would cost for each employee who makes under $21,500 a year, $53.75 per quarter or a net of approximately $7 more a year. This approach would entail removing the real estate transfer tax from our list, which would have yielded $22.4 million. Concerns were raised that the real estate tax would burden the first-time buyers and those selling their homes. The tax plan envisions a 1 percent room tax and an adjustment in the gaming tax of 0.5 percent on each tier. This would be the genesis for the tax plan. We will ask committee staff to work on the payroll tax to match the revenues required.
Senator Neal:
What is the increase on the gaming tax? It is my understanding the first tier, which is 3 percent, will increase to 3.5 percent; the second tier, which is 4 percent, will increase to 4.5 percent; and the third tier would increase to 6.75 percent. What would be the revenues?
Chairman McGinness:
Will we need to get the numbers from the State Gaming Control Board?
Rick Combs, Fiscal Analyst:
We will not need the assistance of the State Gaming Control Board, but we will need time to give the committee an accurate number.
Senator Neal:
How do we know this is a solid figure and would raise the necessary revenues?
Chairman McGinness:
We feel the payroll tax will generate more than the amount necessary.
Senator Neal:
Is the gaming tax needed?
Senator McGinness:
Each tier of the gaming tax would be increased by 0.5 percent. We would achieve our goal with the addition of the gaming, room, and the payroll taxes.
Senator O’Connell:
In view of the fact we have a payroll tax, could we take the retailers back to their original 1.25 percent collection tax?
SENATOR O’CONNELL MOVED TO REINSTATE THE 1.25 PERCENT COLLECTION TAX.
SENATOR TIFFANY SECONDED THE MOTION.
Senator McGinness:
Taking this action would result in losing $19 million in the Senate Taxation Revenue Plan.
Senator Neal:
Why should we take this action?
Senator O’Connell:
I requested this action because of the payroll tax.
THE MOTION FAILED. (SENATORS NEAL, TOWNSEND, RHOADS, AND MCGINNESS VOTED NO. SENATOR COFFIN WAS ABSENT FOR THE VOTE.)
*****
Senator McGinness:
I would accept a motion.
SENATOR RHOADS MOVED TO APPROVE THE TAX PACKAGE.
SENATOR TOWNSEND SECONDED THE MOTION.
Senator Townsend:
Your point concerning the need to get funding for this budget, education and its various components including mental health, is well-taken; I will support this tax package going to the floor. I would welcome and review any amendments brought forth.
Senator McGinness:
When we started this process I said every Senator’s vote would be theirs on the floor, and amendments will not be looked upon negatively.
Senator Neal:
The people have not been dealt with fairly, in terms of gaming. We are proposing a tax package, but we do not know the cost. Based on the Governor’s proposal in S.B. 238, the revenues raised would be approximately $50 million to $60 million from the gross gaming tax, which is too low for an industry that makes billions of dollars in this state. We have included the 1 percent services tax. I have a problem not taxing gaming to the extent it should be taxed. Even the state of Mississippi, whose gaming taxes are presently at 12 percent, is considering raising the tax an additional 3 percent. At one time they were the same as Nevada in terms of having the lowest taxes in gaming in the country, but now they are the third lowest in gaming taxes. Nevada is the lowest in gaming taxes. Until there is a substantial increase in the gaming tax, I cannot support the tax package.
Senator McGinness:
I neglected to mention the next item to be removed from the list was the services tax scheduled to be effective January 1, 2005. Senator Rhoads, would you amend your motion to remove the service tax?
SENATOR RHOADS MOVED TO AMEND HIS MOTION TO REMOVE THE SERVICE TAX FROM THE TAX PACKAGE.
SENATOR TOWNSEND SECONDED THE MOTION.
Senator McGinness:
We are eliminating the BAT tax, the real estate transfer tax, and services tax. We are providing for easy administration. This is the information employers report presently to the Employment Security Division. The Department of Taxation has indicated this could be easily administered.
THE MOTION CARRIED. (SENATORS NEAL AND TIFFANY VOTED NO. SENATOR COFFIN WAS ABSENT FOR THE VOTE.)
*****
Senator O’Connell:
For the record, “I will not vote for this tax package on the floor, but I will vote for this to get out of committee.”
Senator McGinness:
There being no further business at this time, I will adjourn this meeting at 6:41 p.m.
RESPECTFULLY SUBMITTED:
Patricia Vardakis,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: