Nevada lawmakers include brothels in tax on services bill

In an effort to fund government services during a crippling recession, the Democrats have proposed a 1 percent tax on services, including those offered at Nevada’s legal brothels.

They say their plan would raise hundreds of millions of dollars to pay for K-12 schools, colleges and social services.

To do that, they cast a wide net with the service tax — and didn’t exclude brothels. In the past, lawmakers have balked at a tax on brothels, fearing it would further legitimize the legal sex trade in the state’s rural counties.

“I think we need to be looking at including as many people as possible,” said Assembly Taxation Committee Chairwoman Marilyn Kirkpatrick, D-North Las Vegas.

Kirkpatrick and others behind Assembly Bill 569, which would enact the “transaction tax,” say the more services it includes, the lower the rate can be, which makes the tax more fair and less burdensome to any one industry. They’re also reluctant to start making too many industry-specific exemptions for fear it will prompt more businesses to ask to be excluded and undermine the effort to apply the tax as uniformly as possible.

As such, it would cover nearly every service imaginable, from haircuts to labor on plumbing and car repairs and from accountants and consultants to, apparently, legal prostitution.

As written, the bill would generate about $566 million in the first 18 months, according to an estimate presented at a Thursday hearing on the transaction tax. Some of the revenue would be offset by a proposed decrease in the sales tax rate on goods.

The bill does list some exclusions, mostly services lawmakers consider necessary such as funerals, rent and utilities or those that already have a state tax, such as gambling.

“We wanted to be as inclusive as possible,” said Assembly Speaker John Oceguera, D-Las Vegas, describing the logic behind the bill. “We also wanted to eliminate anything that would be regressive in nature.”

The bill was introduced Wednesday and had its first hearing Thursday morning. Lawmakers haven’t ironed out the details or publicly discussed how it might apply to brothels. Lawmakers and staff members who worked on the bill haven’t identified any provision that would exclude legal prostitution.

As recently as 2009, lawmakers rebuffed efforts by the legal sex industry to tax brothels, which are allowed in Nevada’s rural areas but prohibited in Clark and Washoe counties — home to Las Vegas and Reno — as well as in Carson City and Douglas and Lincoln counties.

The Nevada Brothel Association supported the 2009 proposal for a brothel tax but ran into opposition from then-Speaker Barbara Buckley, D-Las Vegas.

Brothel industry lobbyist George Flint said then, and now, that a state tax serves to enhance the legitimacy of the business in the eyes of the state.

“We are ready” for a tax, Flint said. “We have been for 10 years. As long as it isn’t a huge tax, it is wonderful.”

He added that if Nevada really wanted money to alleviate social problems and pay for education, it would expand the legal sex trade into Las Vegas, which is an epicenter of illegal prostitution.

Flint estimated there are as many as 33,000 full- or part-time sex workers doing business illegally in Clark County.

He said if 1,000 workers were legally licensed and conducted an average of four “dates” per work day, they could generate $730 million in revenue at $500 an hour.

He said a 20 percent tax rate would mean about $146 million annually for the government.

“It would solve so many shortfalls in Las Vegas that right now aren’t covered,” Flint said.

Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or
702-477-3861.