Small business sold out at Legislature

July 25, 2003 - If you are a small business owner, you have my sympathies now that the Legislature has ended.

Thanks to the Gang of 63 and, yes, your business lobbyists, you will pay more. Big Business did well, so did gaming, relatively speaking. But small business folks, who would have been exempt or paid less under every other tax plan, will pay more.

This isn't my opinion. It is a fact.

The tax task force proposed a gross receipts tax that would have exempted any business with revenue of $350,000 or less. Gov. Kenny Guinn's plan raised the threshold to $450,000 - estimates were that at least 60 percent of Nevada businesses would have been exempt. The proposed net profits tax would have only hit larger companies. The combination payroll tax and franchise fee was slated to make big businesses pay more.

But those were all scuttled in favor of a plan favored by your chamber of commerce - a payroll tax with a credit if you provide health care care coverage for your employees. So instead of getting off scot-free, small businesses now get to pay more under this scheme, which may meritoriously give a deduction for health care coverage, but that's a benefit much easier for larger employers to pay.

If this isn't the irony capstone of the 2003 Legislature, I don't know what is. After all the talk by the business folks and the conservative Republicans about protecting small businesses, they helped Big Business and gaming.

Sure, banks can rejoice. Multimillion dollar enterprises should be thrilled. And gaming, in the short run at least, wins again.

You want some proof? Happily, it's easy to provide, thanks to Jeremy Aguero, the number-cruncher par excellence. Aguero has taken a look at what various businesses would pay under the final tax package and compared those numbers to their tax burden under various other proposals. Here is some of what he found:

Under the payroll tax plan passed, the average small business would pay $1,137 a year. The average large business would have to cough up $227,437.

Under the task force plan, with the gross receipts tax, the average small business would pay $840 a year. A large business would have to pony up $296,645

Under the governor's plan, which had an even higher exemption level on the gross receipts, the burden for small business would have been $605 a year. And for the bigger folks, it would have been $343,915.

Under the net profits tax proposal, small businesses would have paid nothing. But larger businesses would have had to pay $247,500 on average.

Get the picture? What a travesty. Aguero also points out through his compelling analysis that the difference in the burden on high-margin and low-margin businesses is zilch. That is, both kinds of businesses with the same payrolls pay the same amount.

And yet that was the concern expressed from Day One by the business lobby about the gross receipts tax, that it would force low-margin businesses that didn't make much profit to pay the same as higher profit companies.

With this business-backed plan, no allowances are made. And I bet a lot of low-margin businesses can't provide health care coverage, either, so they won't get the credit for that.

So the bottom line, which remains ample for big business and gaming: The smaller fish were eaten by the larger fish. The golden rule - he with the money rules - rang true again in Carson City. And they say this session was so different.

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Article Copyright ©: J. Ralston, In Business Press