Posts Tagged ‘Pierce’

Sin Tax Debate Focuses On Public Health Benefits, Revenues, Effects On Business

By Sean Whaley | 1:16 pm April 5th, 2011

CARSON CITY – Advocates for a tax hike on cigarettes and liquor made their case in the Nevada Legislature today, both to raise revenue and improve public health.

The proposal received a mixed reaction from lawmakers, and some lobbyist opposition, however, because of the negative consequences on business.

The Assembly Taxation Committee heard a proposal from Assemblywoman Peggy Pierce, D-Las Vegas, to increase the tax from 80 cents on a pack of cigarettes to $1.70. Her measure would also increase liquor taxes.

Nevada Assemblywoman Peggy Pierce, D-Las Vegas, testifies on her "sin" tax bill today. Photo by Cathleen Allison/NevadaPhotoSource.com

The Senate Revenue Committee also heard a separate measure to increase the cigarette tax to $2 a pack.

Pierce said her goal with Assembly Bill 333 is increasing general fund tax revenue, but a number of health advocates testified in support because of the public health benefits of increasing the tax on tobacco. They noted that smoking rates for both adults and children would decrease with the proposed cigarette tax hike and the increase on other tobacco products.

The Nevada Department of Taxation estimates that about $250 million would be generated over the two years of the budget if the tobacco and liquor tax hikes are approved as proposed.

“I believe this state will be devastated if we do not raise revenues,” Pierce said.

The cuts being proposed in Gov. Brian Sandoval’s budget will take a minimum of a decade to recover from, she said.

Pierce’s bill is the first tax proposal to get a hearing this session.

But the proposals to increase “sin” taxes in the Nevada Legislature face the same roadblock of any other revenue proposals being considered by some lawmakers this session: Sandoval’s unwavering rejection of any tax or fee increases to balance the budget.

This position includes increases in cigarette and liquor taxes, said spokeswoman Mary-Sarah Kinner.

Advocates for the cigarette tax point to a survey of Nevada voters showing strong support for the measure as a way to raise tax revenue.

Assemblyman Ed Goedhart, R-Amargosa Valley, who said he smokes an average of a pack of cigarettes a week, agreed that hiking the tax is a good way to raise revenue if the objective is to correct unhealthy behavior.

But Goedhart said obesity is a bigger health issue, and that a tax on calorie consumption could generate public health benefits as well.

He questioned why the Legislature would want to single out smoking among the many unhealthy activities engaged in by the public at large if the objective is to improve the health of Nevadans.

“I mean where does it stop,” Goedhart said after the hearing. “Then it becomes a form of nanny government. Are we going to do a body mass index and charge a person more taxes because they are going to be a burden on the health system because they are going to have the possibility of weight related health issues?”

The proposed increases generated opposition from a variety of groups.

Katie Jacoy, representing the Wine Institute, a public policy association representing 897 California wineries, submitted testimony in opposition to the increases in the alcohol tax in AB333 because of the significant increase proposed on wine and other alcoholic beverages.

“This proposed tax increase will ultimately harm the responsible wine consumers in Nevada by increasing the price of wine, which is difficult to bear in tough economic times,” she said.

“Under the bill, the excise tax on wine with an alcohol content of 14 percent or less would increase from 70 cents to $1 per gallon, and on wine with an alcohol content above 14 percent would increase from $1.30 to $1.75 per gallon. Given Nevada’s 6.85 percent sales tax that also applies to wine, consumers in Nevada will likely pay one to the highest prices in the U.S. for their wine.”

These price increases will be passed on to the consumer, Jacoy said.

Much of the testimony focused on the cigarette tax, which was last increased in Nevada in 2003. Nevada ranks 35th lowest in its tax rate. New York is the highest at $4.35 a pack, while Missouri is lowest at 17 cents, she said.

California’s cigarette tax is now 87 cents but a $1 increase in the rate is being considered.

One area of opposition to the bill came from premium cigar businesses in Nevada.

Michael Frey, owner of FreyBoy Tobacco, a business that operates six premium cigar shops in Las Vegas, spoke in opposition to the proposed increase in tobacco products other than cigarettes from 30 percent of the wholesale price to 55 percent.

If the increase was approved, Frey said he would close four of his six shops and lay of 35 of 50 employees. Cigar smokers would just begin purchasing their tobacco products over the internet, which is legal, he said.

“Cigar smokers will not quit smoking cigars because it is not an addictive product,” Frey said. “They will simply go on the internet and buy the products with no taxes associated with them and have it shipped into their houses in Nevada.”

There was also concern expressed by some of those testifying that raising liquor and tobacco taxes will cause consumers to purchase their products over the internet.

Goedhart said it may not be legal to purchase cigarettes over the internet to avoid state tobacco taxes, but any projected revenues from a tax increase will be affected by this practice. Goedhart said he found cigarettes for sale on the internet after just a quick search on his computer.

“If we increase the tax we may be increasing tax evasion behavior,” he said.

Peter Krueger, representing the Nevada Petroleum Marketers & Convenience Store Association, among other interests, agreed that consumers would likely seek out cheaper alternatives to avoid the tax.

In her concluding remarks, Pierce said: “I think that if we don’t make a considerable course change, I think that when people can begin to sell their houses again, they will go back to the states that they came from with bigger governments and higher taxes, and a better education system, and museums and libraries and all of the things that come from creating community through the collection of taxes.”

Audio clips:

Assemblywoman Peggy Pierce says people will leave Las Vegas when they can afford to do so if changes aren’t made:

040511Pierce1 :17 and higher taxes.”

Pierce says they will return to states with all of the amenities that come from the collection of taxes:

040511Pierce2 :15 collection of taxes.”

Assemblyman Ed Goedhart says raising taxes to curb smoking is Nanny State behavior:

040511Goedhart1 :17 weight-related health issues.”

Goedhart says raising cigarette and liquor taxes could lead to tax evasion:

040511Goedhart2 :11 variety of ways.”

Cigar shop owner Michael Frey says he will close some of his shops if the tobacco tax increase is approved:

040511Frey1 :15 I now have.”

Frey says cigar fans will just buy the product over the internet:

040511Frey2 :15 houses in Nevada.”

 

 

Support, Questions, Rejections Follow Call To Broaden Nevada Tax Base Using Expanded Sales Levy

By Sean Whaley | 1:15 pm June 3rd, 2010

CARSON CITY – A proposal to simplify, broaden and stabilize Nevada’s tax base by expanding and reducing the sales tax to include services from haircuts to legal advice is generating some support and plenty of questions from lawmakers and interest groups.

The proposal, presented Tuesday by Geoffrey Lawrence of the Nevada Policy Research Institute, would be revenue neutral and would lower the 6.85 percent state sales tax rate to 3.5 percent. As part of the proposal, the insurance premium tax and the payroll tax paid by businesses would be eliminated as well.

The NPRI proposal would even include food purchases as taxable items, but would also provide tax relief to residents up to the federal poverty line.

One potential challenge to the proposal is that voter approval might be required depending on how such a plan was drafted.

Lawrence, a fiscal policy analyst for NPRI, said his plan is intended to counter what is expected to be a call for a broad-based business tax by at least some members of the Legislature in 2011.

Lawmakers are facing a $3 billion shortfall and are awaiting a study of their own on how to respond to the anticipated revenue shortfall. The study by Moody’s Analytics funded by the Legislature’s Interim Finance Committee is due to lawmakers later this year.

Lawrence said his plan would stabilize and broaden Nevada’s tax base without further burdening Nevada’s taxpayers, and would also “strengthen our economy by eliminating the job-killing modified business tax.”

The NPRI study found that a corporate income tax is actually one of the least stable tax instruments available to state governments, and is significantly less stable than any tax instrument currently employed in Nevada. Adding a corporate income tax would therefore make the state’s tax structure more, not less, volatile, Lawrence says in his  report titled, “One Sound State, Once Again: Comprehensive fiscal reforms to again make Nevada strong, prosperous and free.”

The study also calls for spending reforms, including a priority-based approach to budgeting and limits on spending increases tied to inflation and population growth.

Several lawmakers commenting on the report have questioned its usefulness given that it is revenue neutral at a time when the Legislature is anticipating a $3 billion hole in the next budget.

But the proposal is a long-term approach to resolving the state’s revenue and spending issues and is not meant to be a quick fix, said Lawrence. A broader sales tax would bring in increasing revenues at the 3.5 percent rate as the Nevada economy recovers.

Assemblyman Ed Goedhart, R-Amargosa Valley, said he likes the approach, which follows a flat tax model that he and many voters would support.

“I think most Americans are tired of all these loopholes and exceptions,” he said. “The twisting of tax regulations to benefit a powerful constituency or lobby.”

A straight 3.5 percent tax on consumption would be a stable form of revenue, Goedhart said. There should be no exceptions, he said.

His one objection to the proposal is the provision to provide tax relief to low income residents.

“The cost of government applies to everyone,” said Goedhart, a member of the Assembly Taxation Committee.

Goedhart said such a plan in Nevada could serve as a role model nationally and help generate support for a similar change to the federal income tax.

The Legislature also needs to impose spending controls and look at other reforms, from prevailing wage laws to meaningful changes to the state health insurance and public employee retirement plans, he said.

Assemblyman Tom Grady, R-Yerington, said the study contains valuable information the Legislature can use as it tries to resolve its budget problems next session. But details would have to be spelled out in legislation before any such proposal could win his support, he said.

There are a number of sales tax exemptions currently, such as the one for farm equipment purchases, said Grady, a member of the Assembly Taxation Committee. Surrounding states have exemptions for farm equipment and not offering the same here would put Nevada companies at a disadvantage, he said.

The NPRI research is solid and gives lawmakers a starting point for a tax discussion next session, Grady said.

Sen. Mike Schneider, D-Las Vegas, said the proposal as presented wouldn’t bring in more money even though the state is facing a major revenue shortfall. He also questioned whether such a major change to Nevada’s tax structure could be accomplished in the 120-day session when so many other pressing issues are also on the table.

Add in redistricting and all the new lawmakers in the Senate and Assembly and the task would be challenging, he said.

“It would be a major undertaking,” said Schneider, a member of the Senate Taxation Committee. “I just don’t think, with the way our session is designed, that we can get that work done.”

A special session would probably be the best way to tackle such an issue, but whoever is governor in 2011 probably won’t want to call lawmakers back in for such a task, Schneider said.

Assemblyman Paul Aizley, D-Las Vegas, questioned how a revenue neutral tax proposal would help solve the state’s budget problems. The budget for the next two years would typically be in the $6.5 billion range, but is expected to be about $3 billion short, he said.

In talking to voters, Aizley said he is asking what services they want protected and what cuts they are willing to accept. Most people wanted education protected, he said.

Aizley, a member of the Assembly Taxation Committee, said he would also need details of what services would be included in an expansion of the sales tax.

“People don’t know the implications,” he said. “I would not say yes to a services tax until it was spelled out what those services would include.”

Aizley also rejected the NPRI call for what he described as a “zero based” budgeting process for state agencies to use. It is time consuming and labor intensive to review every single program every two years when it is clear many programs will have to be continued, he said.

Assemblywoman Sheila Leslie, D-Reno, said it is encouraging that even a fiscally conservative group like NPRI is in agreement that the state needs to consider revising its tax structure. But any tax plan that is revenue neutral is not realistic given the $3 billion budget hole facing lawmakers next year, she said.

Leslie also suggested the proposal is not really broadening the tax base, since it is just expanding an existing levy to services such as haircuts or tax preparation.

“I don’t think it is broadening the tax base so much as it is taking out the volatility by taxing more things,” said Leslie, a member of the Assembly Taxation Committee.

By eliminating the payroll tax as part of the plan, it could be argued the tax base would actually be narrowed under the NPRI plan, she said.

“It would reduce the burden on business and increase the burden on the rest of us,” Leslie said. “I think the middle class already pays its fair share.”

The idea of taxing services has been discussed before, both in 2003 and 2009, she said. Such proposals always run into roadblocks when the groups to be included in the tax object, Leslie said.

Assemblywoman Peggy Pierce, D-Las Vegas, said she welcomes NPRI to the tax discussion, noting that for a long time the conservative voices in Nevada have suggested that no changes are needed.

But Pierce, who also serves on the Taxation Committee, said sales taxes are regressive and the state already has one of the most regressive tax systems in the nation.

“Making our tax system more regressive is not an improvement,” she said. “I’m not entirely opposed to looking at a sales tax on some services, but not as a substitute for a broad-based business tax.”

Nevada needs to look at how other states that adequately fund their programs and services raise tax revenue and then model itself after those states, Pierce said.

Carole Vilardo, president of the Nevada Taxpayer’s Association, said the proposal needs a great deal of fleshing out so that policymakers can know the implications of what such a change would mean to the state’s tax structure.

Any change to one portion of the sales tax rate, the 2 percent that goes to the state general fund, would need voter approval, she said. Vilardo also questioned whether such a proposal could have an effect on those portions of sales taxes pledged to pay off bonds.

“When you talk taxes, the devil is in the details,” she said.

Two Democrats Break Ranks

By Elizabeth Crum | 6:17 pm February 13th, 2010

The Las Vegas Sun has a story today about two Democrats – Assemblywoman Peggy Pierce and Senator Bob Coffin – who are breaking ranks with party leadership and calling for an increase in revenue.  Their comments/suggestions/ideas:

“I don’t think all of my colleagues don’t want to talk about taxes. I just have a shorter fuse about being calling a coward,” Pierce said of criticism lawmakers have received from their allies.

Coffin said: “I’m working on leadership.”

On how to raise the money, Pierce and Coffin disagree.

Pierce favors a broad-based business tax on profits. This, she said, would capture large businesses — including liberals’ favorite target, Wal-Mart — that don’t pay their fair share.

Coffin says the state needs a tax that will bring in revenue immediately. An increase in the sales tax is “the quickest, most publicly acceptable,” he said.

Democratic leadership, aka Senate Majority Leader Steven Horsford and Assembly Speaker Barbara Buckley, this week came under fire from progressives, the teachers union and advocates for various social services groups for saying they do not believe the state should raise taxes during a recession.