IMPACTS OF HUGE 2003 TAX INCREASE

Governor Kenny Guinn’s state budget became the largest tax increase in the history of the state to finance the largest expansion of government in the history of the state based on a political creation rather than a mathematical calculation. We are now beginning to live with the impacts of SB 8, the new law, on the fragile economy of Nevada.

First, citizens will all be paying more for alcohol, cigarettes, show tickets, real-estate sales, and state filing fees.

Second, the payroll tax is going to bite into businesses and employee salaries. A Reno Gazette Journal Business Poll asked how the new taxes (payroll, banking, gaming, etc.) will affect their businesses. Here are the responses:

“If we have businesses that move here because of low taxes, maybe we don’t want those businesses. Let’s pass these taxes to help people, and not worry about the businesses.” Assemblyman Harry Mortensen, D-Las Vegas

Third, gaming, while orchestrating the “fairness tax” on gross receipts for other businesses, was captured in the wide-net definition of funding institutions (any business that lends or extends credit) subject to the 2% payroll tax not the .7% for businesses.

MGM Mirage is quitting the Las Vegas Chamber of Commerce, Nevada Development Authority and Nevada Resort Association in protest over the increase in gaming taxes… MGM Mirage is the state's biggest taxpayer and employer (39,000 workers in a dozen casinos). Speaking of companies who favored a tax on gaming, "We will evaluate the positions they took in Carson City," Chief executive Terry Lanni told the Las Vegas Review-Journal. "If they actively promoted increasing our taxes and not theirs, we will deal with them accordingly."

Forth, some may still think of Nevada as a better tax and business climate option than states like New York or California but damage has certainly been done. Nevada will probably move down on lists maintained by organizations like the Tax Foundation causing those who were going to incorporate or build a new corporate facility to look elsewhere. Wells Fargo executive Mendy Elliot says they could have come to Nevada, but are going to North Dakota instead; citing higher taxes and future tax uncertainty that may also slow the number of new branches planned. At a certain point of decline an overwhelming negative public perception that accelerates the process. It becomes very hard to turn things around. The worst example is right next door in California.