Sales tax is answer to room tax problem, assemblyman says
Assemblyman Lynn Hettrick’s says his proposal to replace lost revenue from the new room tax law is simple – sales tax.
Hettrick is speaking today at the Carson Valley Chamber of Commerce and Visitors Authority monthly general membership luncheon, talking about Assembly Bill 616 and transient occupancy tax, or room tax. He will outline his plan for offsetting the money lost to the county resulting from AB616.
Hettrick said sales tax is the most desirable source for the revenue, that the cost to Douglas County residents would be minimal.
“It’s infinitesimal,” Hettrick said. “It’s miniscule. The effect is virtually nothing.”
At 6.5 percent, Douglas County has the lowest sales tax rate in Nevada, Hettrick said.
The Nevada State Legislature passed AB616 earlier this year, resulting in new laws on how room tax must be used in Douglas County. Currently, 37 percent of room tax revenue goes toward the promotion of tourism, and the county has until 2008 to gradually move toward 65 percent.
Room tax revenue largely funds Douglas County’s parks and recreation, libraries and senior center. If the county is going to keep its services funded by room tax operating at current levels, additional revenue will have to come from somewhere.
A quarter of a cent increase in sales tax, going to 6.75 percent, would cover all those funds, according to Hettrick.
Using sales tax to make up the loss of funds has several benefits, Hettrick said. A significant portion of the county’s sales tax is paid by tourists, and the tax is not applied to food, medical or housing costs.
According to Hettrick, a $50 purchase would cost 12.5 cents more because of the tax and a $1,000 purchase would cost $2.50 more. A household which spends as much as $3,000 on taxable items in one month would pay only an additional $7.50.
Hettrick said an increase in property tax or utility tax would have a more detrimental effect on county residents. People on low or fixed incomes are hit hard by those types of taxes because they must spend money on housing, heat and light. Taxpayers have more control over what they spend on sales-taxable items.
While the cost of a new house will be increased somewhat by sales tax, Hettrick said it would be preferable to property or utility taxes. A sales tax would result in only one increase, while taxpayers would have to continue to pay property and utility taxes every month.
Resulting from AB616, the county will need to allocate an additional $1,051,000 to marketing tourism by 2008, about $450,000 of which will need to be allocated by July 1999. A quarter cent sales tax increase could raise more than $1 million a year.
While property tax could be increased by county officials, an increase in sales tax requires approval from the Nevada Legislature. Hettrick said the Legislature would have no problem with approving the tax, if the people of the county wanted it. He suggests Douglas County should propose an advisory ballot question for the 1998 elections, allowing residents to choose between sales tax and other taxing options.
If passed by the people, Hettrick said, the Legislature is almost certain to approve the sales tax. It could be enacted as early as July 1999.
Douglas County could have a negative cash flow over the next two years totaling about $600,000. But, Hettrick said the first year of collection would bring in about $1,200,000, which would repay that expense and cover all future expenses related to room tax.
Hettrick said he thinks county residents would support the sales tax if Douglas County officials allocated the money from the increase to go specifically to certain areas, such as senior services, libraries, parks, infrastructure or roads.
Hettrick said no tax increase, whether sales tax or other, should be enacted which just puts the money into the general fund. He said residents need to be given accountability, need to be shown where the money will go, in order to support the sales tax.
Hettrick said, so far, residents who have heard his plan have been supportive.
“Essentially, everyone said it sounds really good,” Hettrick said. “They asked, ‘why aren’t we moving in this direction?'”
Hettrick said the members of the room tax citizens committee have all been given a copy of his proposal for consideration.
Hettrick is speaking today is at the Carson Valley Inn at 11:45 a.m. Cost for the luncheon is $9.