Legislators debate corporate income tax bill

CARSON CITY — Anti-tax advocates on Tuesday ripped a bill that would impose a corporate income tax in Nevada.

Assembly Bill 336, part of a four-part tax increase proposed by Assemblywoman Peggy Pierce, D-Las Vegas, would levy a 4.5 percent income tax on businesses earning more than $500,000.

Proponents estimated it would bring in $1.2 billion over the next two years, enough to replace many of the cuts proposed in Gov. Brian Sandoval’s budget.

During the hearing before the Assembly Taxation Committee, Republican legislators denounced the bill, while Democrats said it was necessary to fund education and other services.

Because Sandoval and every Republican legislator oppose tax increases, the debate seems to be academic. Democrats are a few votes short in both houses of the two-thirds total needed to impose taxes and to override the governor’s veto.

No action was taken Tuesday.

“Our current structure is creating a generational divide of the haves and have-nots,” said Craig Stevens of the Nevada State Education Association, which commissioned the analysis of the revenue that would be produced by the corporate tax. “The question is soon going to be, ‘Did you go to school in a boom or a bust period?’ “

Stevens said businesses have a responsibility to reinvest in the state’s infrastructure. He noted that every state except Nevada, Wyoming, South Dakota and Washington has a corporate income tax. Nevada does have a payroll tax.

“Doing business in Nevada is considered a privilege,” Stevens said. “In order to make money off the hard-earned dollars of the workers of our state, that should come with a price.”

Assemblyman Pete Livermore, R-Carson City, took issue with the statement and said Nevada should seek to accommodate businesses that are doing it a favor by creating jobs.

Opponents say businesses would have to absorb the additional cost of the corporate income tax, and the easiest way to do it would not be raising prices but laying off workers or lowering wages.

During the hearing, Progressive Leadership Alliance of Nevada lobbyists displayed jeans, detergent and other items they said can be bought in Walmart stores throughout the country.

The jeans are $2 more expensive in a Reno Walmart than in a Walmart in Idaho, where the company must pay corporate income taxes, said Bob Fulkerson, president of the umbrella advocacy organization that represents more than 40 liberal-leaning groups in Nevada.

Walmart “isn’t going to jack up the prices of goods in Nevada” if legislators impose a corporate income tax, he said.

Carole Vilardo, president of the Nevada Taxpayers Association, said many sections of the 40-page bill are unworkable and perhaps unconstitutional, including a clause that would prevent businesses from challenging their tax bills.

She said a business income tax is an unstable source of revenue and pointed out about a dozen problems with the bill that should be corrected before it is processed.

The bill links the state taxes to the amount of federal taxable income reported by a company, Vilardo said. But one section asks businesses to guess the taxable figure they would have reported to the IRS.

The bill also has conflicting dates when the taxes would be due.

Vilardo also noted there was no indication in the bill whether the Legislature intends to keep the current business payroll tax law.

Nevada levies a 1.17 percent payroll tax, which comes out to about $600 a year on employees earning $50,000. That tax will be cut almost in half on July 1 unless reauthorized by the Legislature.

Assemblywoman Teresa Benitez-Thompson, D-Reno, repeatedly challenged opponents who predicted dire consequences if the bill becomes law.

She said most states have a higher corporate income tax than the 4.5 percent proposed in AB 336.

“The sky isn’t falling in Utah,” Benitez-Thompson said. “I want to know how the sky’s going to fall in Nevada when this rate is lower than other states.”

The Associated Press contributed to this report. Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3900.