Assemblymember P.K. O’Neill. (Photo: Richard Bednarski/Nevada Current)
Despite growing concerns about an economic downturn, Nevada lawmakers are considering legislation to adjust the commerce tax threshold, a change that would result in less revenue coming into the state.
Nevada businesses are currently subject to the commerce tax on gross revenue above $4 million a year. Assembly Bill 276, sponsored by Republican Assemblymembers P.K. O’Neill and Jill Dickman, would make the threshold a moving target by tying it to inflation and the consumer price index.
The Assembly Revenue Committee gave the bill a hearing in mid-March but took no action until a Friday deadline day The bill passed the committee on a voice vote, with four Democrats opposing.
Expected revenue loss from AB276 would be a miniscule part of the state’s overall budget, but all revenue conversations this legislative session are fraught with anxiety.
Nevada’s Economic Forum in December projected a conservative forecast of $12.4 billion in tax revenue over the next two fiscal years, but acknowledged that Trump’s more grandiose campaign promises — specifically tariffs and mass immigration — had the potential to significantly change the economic outlook. The Economic Forum will meet on May 1 and may adjust that forecast up or down.
“With the economic challenge we’re facing, and the current state of the economy, and the upcoming Economic Forum expectations, I will be voting no on bills abating or negating revenue, which includes this bill,” said Assemblymember Venicia Considine prior to the committee vote on AB276.
Republicans have largely downplayed the possibility of Nevada facing deep financial cuts. Senate Minority Leader Robin Titus at the beginning of the legislative session suggested the state can just “find ways to spend less,” and Gov. Joe Lombardo this month said the state will simply “make adjustments on the fly.”
O’Neill during the bill’s hearing in March called it “fair and effective” because it ensures the commerce tax reflects economic conditions. He and Dickman both served in the Legislature in 2015 when the commerce tax was passed. Dickman voted against it. O’Neill voted for it.
O’Neill said that negotiations at the time focused on ensuring that small businesses were not impacted. He argued that, with time and inflation, businesses the Legislature did not intend to include are now being subject to the tax.
The argument was met with some skepticism from several Democrats on the committee.
“Four million dollars still seems like a pretty large capital business,” remarked Assemblywoman Erica Roth, a Democrat from Reno. Roth also voted against advancing the bill out of committee.
Michael Nakamoto, chief principal deputy fiscal analyst for the Legislature’s nonpartisan staff, noted that 8,226 taxpayers paid $341.1 million in commerce tax in fiscal year 2024.
The average three-year inflation rate preceding that tax year was 5%. If the threshold proposed in AB276 were in effect, 145 of those businesses would not have had to pay the commerce tax, while the remainder would have only had to pay on gross revenue above $4.2 million instead of $4 million.
That would have resulted in approximately $1.6 million less in revenue for the state, according to Nakamoto.
Supporters of the bill include the Nevada Trucking Association, the Nevada Franchised Auto Dealers Association, and the Vegas Chamber.
Assemblymember Danielle Gallant, a Republican from Henderson, said during the bill’s hearing that she supports the bill — “something’s better than nothing” — and asked the bill sponsors if they’d contemplated something “more aggressive.”
“If I had my way, I’d take the tax out but it has become part of our budget,” said O’Neill in his response, adding with the bill he is attempting to find a simple and succinct way to move forward with a tax that was heavily negotiated a decade ago.
The bill would not lower the threshold in the event of deflation. Nakamoto commented that, were there to be three years of negative inflation, the state likely “would have bigger problems to deal with.”