Band-Aid on $3 billion hole

By Jon Ralston

Friday, April 17, 2009 | 2 a.m.

How do you solve a problem like a $3 billion hole?

How do you do it thoughtfully in a matter of a few weeks?

How do you do it in a way that doesn’t crush the already flattened economy but also broadens the tax base so this will never be so severe again?

Answers: You don’t.

As the Legislature moves toward its final third, the Democrats have crumpled up their calculated timetable to create the momentum to do what they once thought must be done. Instead of a plan with vision and forethought, the ghosts of sessions past have arrived, not as cautionary storytellers but as ominous harbingers.

Great expectations and grand ambitions have given way to economic realities and political expediency. Broadening the tax structure, taxing business, overhauling the tax-and-spend process? Another time, perhaps.

Too few days left for anything substantive and serious, so let’s just throw something together, board up the place for another 18 months, go home and hope the voters, as usual, have short attention spans. The possible outcomes now can be narrowly defined in a range between $500 million and $1 billion:

• Double the existing payroll tax, perhaps shielding smaller businesses from the impact, which will raise about $500 million. I consider this the most likely “solution.”

• Double the payroll tax and cobble together some melange of gimmicks, transfers and fee increases. That might get the bar more toward $600 million or $700 million, allowing more programs to be restored.

• Double the payroll tax, extract some money from mining (perhaps removing a deduction or two from the statute) and throw a few other minor tax goodies into the bag. Now we might be at three-quarters of a billion.

• Enact a sales tax on some services, the proverbial nose under the tent, along with some adjustment on the payroll tax (depending on how many services are included). I consider this highly unlikely but it could raise a substantial amount of money.

• Doing most or all of the above, getting toward the $1 billion figure that scares so many legislators and persuading themselves they did the best they could. This is a fantasy scenario that would garner about four votes. Maybe.

Perhaps you think this list drips with cynicism. Not so. It is guided by history and the incrementalism that has characterized every budget/tax/spending debate during the last two decades and longer.

I concede both the economic and political constraints the Gang of 63 confronts. The state’s economy is as dire as any in America. Its major, dominant industry is teetering on the brink of collapse — its premier players are a step or two away from Bankruptcy Court. The housing market, once the symbol of the country’s biggest boomtown, has gone bust. These factors have caused that gaping $3 billion hole, so finding an economic sector to tax is not simple.

And even if Speaker Barbara Buckley could get her caucus to go for a billion-plus in new revenue, such a package likely would be entombed in the state Senate, where Majority Leader Steven Horsford needs two Republican votes, assuming he could keep his caucus whole (a gigantic “if,” indeed).

So I try to mitigate my criticism of this current legislative crop because they are limited by the field plowed by past contingents who refused to raise revenues through a stabilized tax system that might have vitiated the devastating impact of the current cuts. And I suppose in comparison to The Man Formerly Known as Governor, they may look like visionaries.

Perhaps the end will make the lawmakers, who have derided Ø for his “no new taxes” sound-biting, proud that they articulated their own thoughtful philosophy: Almost no new taxes, less than $1 billion and definitely not the largest tax increase in history.

Problem solved.