Business license fee plan unveiled

Gov. Brian Sandoval was about to unveil details of his tax plan, and Monte Miller wanted to be there.

Businessman Miller, already viewed by some in the administration as Enemy No. 1 because of his opposition, crashed the media briefing Thursday afternoon that was video-conferenced from Carson City to Las Vegas. And after the detailed presentation of the expanded business license fee, Miller wasn’t giving an inch in his advocacy for an alternative using the existing payroll tax, known as the Modifed Business Tax (MBT).

“The MBT is the fairest and most equitable business tax in the United States,” Miller told me after the governor was finished. He insisted the MBT was a better vehicle than the Business License Fee, which would have to be dramatically increased, with rates from $400 up to $2.6 million, to raise the $500 million every two years the governor has in mind.

The MBT certainly is a better vehicle for Miller, who facilitates registrations for other companies and only has 25 employees, and a much worse one for those businesses with thousands of workers such as those on Las Vegas Boulevard South. And therein lies the rub, and presages the coming battle.

It will be Sandoval, quietly backed by most gamers, who nevertheless will pay millions under this new tax, vs. Miller and other business folks who make a fortune and pay almost nothing in taxes. (The argument should not be about gaming, which pays a fortune in taxes, but the free-riding businesses always manage to make it about the casinos.) And on the sidelines, as ever, will be the Las Vegas Metro Chamber, which conducted a study that all but recommends a sales tax on services, which no business pays but all consumers would, yet its representatives say the chamber has no posiition.

The story of the upcoming legislative session is not Michele of the Thousand Tax Liens and her feeble enablers. Michele Fiore, who chews scenery and attracts media, and a half-dozen or so know-nothings will self-marginalize, no matter how much attention they receive or maybe because of it. But if Miller and others can successfully build momentum against the governor’s plan, they may be able to influence enough votes to block the BLF and either get an MBT package or….nothing at all.

Nothing at all.

“I applaud the governor for starting this out,” Miller said at the Grant Sawyer Building near downtown Las Vegas. But Miller also clearly wants to finish off -- i.e entomb -- what the governor started with his State of the State, began to publicly sell Thursday and will have to advocate for with a public and private fury that we have not seen from Brian Sandoval.

“I am going to defend it,” Sandoval said during the briefing. He will have to against what is expected to be a furious and unrelenting assault that we have not seen since Kenny Guinn proposed a gross receipts tax in 2003.

Gov. Guinn got his tax increase -- $800 million worth – but by the end his GRT was ground up into an unrecognizable, policy-challenged tax crumbs that cooked together tasted like a very bad casserole with conflicting ingredients. Yes, it made everyone want to throw up.

If Thursday is any indication, Team Sandoval is ready for a battle in which he has to be seen as an underdog against enemies who have a much less-nuanced message – NO! -- and loud enough voices to garner attention. The governor, in a Carson City meeting room,was flanked by four aides and Jeremy Aguero, the numbers maven who helped come up the plan -- the spreadsheets are attached here.

As you see, they did not shy away from the gross receipts label, acknowledging it was based on one in Texas that has been very controversial, and they readily compared it to the margins taxes of the recent past, inlcuding the one that lost 4-to-1 in 2014 and is a readymade talking point for foes of Sandoval's plan.

Aguero made clear that they mainly used Texas to see how that state calculated gross revenue and that the BLF effective rate is much lower and the tax much simpler. The real beauty of the BLF is that all 330,000 businesses in Nevada pay it, so stretching it out from $400 to $2.6 million, and assessing it based on margin of profit, makes sense. It is very easy to calculate.

“This has been very thoughtful,” Sandoval said, unable to resist a little self-back-patting. And it’s clear that it has been.

But no tax is perfect, and every tax will be opposed by someone. Miller rightly points out that number of employees is much more indicative of a company’s impact on government services, so that’s why he says the MBT is a better structure. Extend it to all businesses and you can raise just as much money as the governor wants to garner for education, he said.

Maybe.

But the MBT is not assessed on the number of employees; it is calculated on total wages. You can have fewer employees making good money and pay a lot more than some larger companies.

The governor and others argue that the payroll tax also is the worst vehicle at a time when wages are lagging and could be a disincentive to hiring. And while four-fifths of the state’s businesses don’t pay the MBT, you can’t possibly get enough money from broadening it because there are so many companies with none – or close to no – employees, so the math or the policy doesn't work as well.

Ironically, a few hours before the governor made his presentation, the Vegas chamber folks were hosting a televised event in which they presented their Tax Foundation study, which found many of the already known infirmities in the state’s structure and all but recommends a sales tax on services. Even if you could sell that – and imagine if people were to have their dry cleaning, child care or auto repairs taxed – it’s the one business tax that we know businesses don’t have to pay.

Chamber consultant Joe Henchman tried the old saw about businesses never paying taxes and always passing them on. But the reductio ad absurdum of that is to never tax business, some of which will absorb new taxes, or some of the cost, to stay competitive.

Unlike the Just Say No crowd, who should be made to show what they would cut, Miller and others at least claim, and we have to take this as more than lip service for now, that they support the governor’s call for more money and more reform. At least I think the chamber believes that.

The group put out the emptiest statement after Sandoval’s briefing, full of rhetorical mush and no commitments. And although the chamber deserves credit for paying for a study with some good suggestions, its modus operandi in 2003 and other sessions has been to protect the largest members and sell out the smaller ones. I expect the past is prologue.

No word yet from the Democrats, who promise to have their own plan. Senate Minority Leader Aaron Ford had insisted that  Sen. Pat Spearman was working on a services tax proposal. And Sandoval said Thursday, "I know some of the Democrats are going to propose a corporate income tax.”

Really? “Certainly under consideration,” Ford told me.

Lovely. That has no chance because of the mini-IRS arguments and more.

But the Democrats have leverage – Sandoval needs their votes to pass a tax plan – and all of these competing ideas make me think 2003 redux (gaming vs. Big Business, all politics, no policy, two special sessions, Supreme Court intervention) is possible.

It’s up to the Salesman in Chief to try to make sure that does not happen. He began that job Thursday.

 

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