Business groups preparing to oppose tax initiative

Although the Nevada State Education Association has not yet announced the details of its proposed initiative to impose a state income tax on businesses to fund public education, some business groups are preparing to battle it and others are warning it could stifle economic growth in the Silver State.

"We know there are companies and businesses intending to move operations to Nevada who have put their plans on hold and said, 'We want to see what happens with this new business tax,' " Larry Osborne, executive vice president of the Carson City Area Chamber of Commerce, said Friday.

"One of the things that brings business to Nevada is that we have a less onerous tax climate"

The education association had announced its intent during the 1999 Nevada legislative session to obtain signatures on a petition to significantly increase public education revenue through a business profits tax.

Though the association has not announced final details, the proposed tax is expected to amount to 5 percent on business profits, exempting the first $25,000 of net profits.

Nevada has no income tax for businesses or individuals, and state revenues come primarily from sales taxes, a tax on gaming revenues and a portion of property taxes earmarked only for state debt retirement.

The main sources of education funds are 2.25 cents from the state sales tax, a property tax of 75 cents per $100 of assessed valuation and a state distributive school fund that includes a general fund legislative appropriation, a tax on slot machines, the state's share of mineral lease revenues and other sources.

"None of the businesses or prospects we are talking to are holding back because of the proposed initiative, but they are very concerned," Kris Holt, executive director of the Northern Nevada Development Authority, said Friday. "One said to me, 'I'm coming here from California, not to be in California.' "

He said the NNDA does not take sides on political issues, but that adding another tax on the cost of doing business in Nevada would be a deterrent to the authority's efforts to recruit businesses to the area.

Holt said he personally feels proper funding of education is important but added, "There's a million ways you could designed it to appease the teachers without a profits tax."

Osborne said the Carson chamber has joined with other chambers, trade associations, economic development agencies, business owners and others to form the Coalition to Defeat the Business Income Tax. He said the group is gathering information on what resources can be called upon if a coordinated effort to oppose a business tax is needed.

The local chamber also has formed a local opposition committee of chamber and business leaders. The committee will seek to educate voters about the business community's current contributions to public education, work on educational funding and reforms through the legislative process, make the issue a key topic in the 2000 election campaign and work with Gov. Kenny Guinn on his statewide review of the efficiency of Nevada government operations.

"Initiative petitions are not necessarily the way to govern. That's attempting to govern without the participation of the Legislature, the voters' elected representatives," Osborne said. "Our chamber has taken a position opposing taxation by petition.

"And the governor's review of government efficiency is in progress and is expected to be completed before the next legislative session. Do we really need to raise taxes before we know whether our government is too costly?"

The Nevada State Education Association has attempted to establish a corporate income tax in Nevada before. An initiative petition drive did get enough signatures to qualify the tax for a ballot vote, but the 1991 Nevada Legislature responded by imposing a state business licensing fee. The corporate income tax was defeated in the next election. The business license fee went into the state's general fund and was not earmarked for education.

Carole Vilardo, president of the Nevada Taxpayers Association, said that group has not taken a position on the proposal because no details are available.

But on Saturday, the Las Vegas-based Nevada office of the National Federation of Independent Business released a poll of its members indicating 98 percent of small business owners are opposed to the initiative.

"If this onerous measure were to somehow pass, you would see a precipitous drop in the number of small businesses to tax, since many would be forced to close," the federations Nevada state director Warren Hardy said.

"The average small business owner makes about $40,000 a year, which is less than the average teacher. This ballot initiative would push many mom-and-pop companies over the edge of economic sustainability."

The federation claims to be the largest small business advocacy group in Nevada.