Gaming industry comes out swinging at Assembly tax plan

A major tax plan proposed by Assembly Republicans — that features an expansion of the Modified Business Tax as a main component — met its major adversary Tuesday at the Legislature.

And that is the gaming industry — Nevada’s largest taxpayer and employer.

The Nevada Resort Association made its opposition clear to a plan that officially is sponsored by the Assembly Taxation Committee and raises the rate of the state’s payroll tax — or Modified Business Tax — and expands its reach by about 5,000 more Nevada businesses.

Gaming representatives pushed back on Assembly Bill 464, saying the tax will have a narrow base of taxpayers, hurts job growth and lacks fairness. They said it would also put an unfair burden on the gaming industry, whose business models for running casinos, hotels and other resort amenities are labor intensive.

“It would double down on a tax that lacks fairness, diversity or prudent fiscal policy and increases the state’s reliance on our industry as the largest taxpayer and contributor to the general fund,” said Pete Ernaut, the chief of staff to former Gov. Kenny Guinn and a lobbyist now for the Nevada Resort Association.

Yet other business interests, including the Retail Association of Nevada, the Nevada Manufacturers Association and Nevada Franchised Auto Dealers told members of the Assembly Taxation Committee that they were in favor of the plan.

Those business representatives, who oppose taxing gross revenues, said expansion of the payroll tax is the fairest way to fund Sandoval’s $7.3 billion proposed general fund budget that includes an array of education programs from pre-kindergarten through college.

“Our industry wants to help education, has helped education and will continue to do so,” said the Franchised Auto Dealers’ Wayne Frediani. “And we support this legislation.”

Another said the expansion of the payroll tax is a logical way to fund Sandoval’s education reforms because increased payrolls have a direct correlation to improved education.

“There is a direct connection between education and payroll,” said Ray Bacon of the Nevada Manufactures Association. “The people who get paid the highest in the state are the people who have the highest educational backgrounds.”

The Assembly plan proposes to expand the Modified Business Tax by dropping the payroll threshold of those who must pay the tax. Currently, all Nevada businesses are exempt from the MBT if their payroll is less than $350,000 a year. Under the Assembly Taxation Committee plan, that threshold drops to $200,000 annually and should increase the number of business that will pay it by about 5,000, said one of it’s main sponsors, Assemblyman Derek Armstrong, R-Las Vegas.

It would also raise the payroll tax rate from 1.17 percent to 1.56 percent but eliminate the bank-branch excise tax that has caused some rural banks to close, according to various testimony.

The Assembly Taxation Committee plan also ends the deductions businesses can take on their MBT by offering health insurance. Nevada’s gaming industry, however, is currently the state’s largest provider of health care coverage, Ernaut said.

The plan to expand the MBT would also raise the state’s Business License Fee. It would jump from $200 to $300 annually for most small businesses but would increase to $500 for corporations.

The tax plan, along with other minor tax plans, would bring in $544 million in new revenue and would bring in about $62 million more than Sandoval’s own tax plan. Armstrong, however, said rates could be adjusted as not to tax businesses too much.

Sandoval’s plan, which is based on calculated increases the state Business License fee, has already passed the Senate Revenue Committee and is awaiting a vote on the Senate floor. Any plan to raise or create new taxes must get a two-thirds majority in the floor votes of both houses of the Legislature to pass.

No vote was taken on the MBT plan before the Assembly Taxation Committee Tuesday.

Ernaut struck hard at the notion the MBT tax plan is broad based. Armstrong testified that the plan would increase the number of Nevada businesses that pay the MBT from 13,492 to 18,607.

Assembly Majority Leader Paul Anderson, R-Las Vegas, noted that Nevada only has about 56,000 business with a payroll, although overall, the state has about 330,000 businesses.

“The raw numbers are the raw numbers,” Ernaut said. Of (Nevada’s) 330,000 business entities, about 12,200 pay the payroll tax. Now by any sense of broad based, that is not.”

Yet proponents of the MBT tax plan hammered back, saying the expansion of the MBT would be a stable source of revenue to fund future plans for education.

“The reliability of the source of revenue is key and critical to this discussion, right? Because the investment is critical and key,” Anderson said. “That is what we’re applying this to. The state’s Modified Business Tax has been the state’s most stable, reliable and predicable revenue that we have come up with so far.”

Armstrong agreed that gaming already pays much of the state’s tax burden, but said there is another side to that fact.

“It is true that the gaming industry pays a great burden of the taxes in this state, but it is also true that it (gaming) is the biggest beneficiary of the taxes in Nevada and I just want to make that point, as well,” Armstrong said.