Too late, little hope

By Jon Ralston

Friday, April 24, 2009 | 2 a.m.

The only commodity scarcer than revenue these days in Carson City is hope.

You may think I mean hope for a tax plan, but that is not so. I refer to hope for a thoughtful, deliberative approach to the tax-and-spending package to come so it will be properly vetted and the consequences can be thoroughly considered. That is, there is little hope that what has happened before will not happen again, that unintended consequences surely will occur, that the second-guessers (that’s us) will have plenty of fodder.

The difference in Session ’09 is that those consequences could be more dire because of the economy. The conventional wisdom on one side is that too much taxation will make the situation worse, which it could in the short term. But on the other side, the fretful advocates of more funding for education, health care and infrastructure worry what will happen if, in the Rahm Emanuel construction, a good crisis goes to waste.

But those who theoretically want to do something — i.e. most Democrats and some Republicans — have only themselves to blame, as I have been arguing for some time. And now it is time that, like hope, is a diminishing commodity.

With two-thirds of the session gone and an absentee landlord of the executive branch who has left the governing house and taken the keys with him, it seems unlikely that the Gang of 63 will be able to avoid being evicted from the capital for once again failing to pay their civic rent. Even if they did decide to broaden the tax base by expanding the sales tax, at this point it would have little effect on the gaping budget hole.

Carole Vilardo, head of the Nevada Taxpayers Association who knows as much about this issue as anyone, suggested this week on “Face to Face” that a sales tax on services may be the best policy.

“The state’s economy is service-based,” she said matter-of-factly. “Taxes should reflect your state’s economy. When they do, you can normally get the lowest rates possible.”

That is, imposing a broadly applied services tax at a very low rate could accomplish what many in the capital theoretically would like to do: Raise a lot of money and not destroy businesses.

But where is the plan? And is there even time?

“One of the problems you’ve got is sooner or later we’ll wind up doing something with services,” Vilardo predicted. “The problem with implementing a sales tax on services at this point is that you can set up the mechanics of it, but you’re not going to get revenue from it in my opinion for at least a year.”

So even if it is the most sensible policy, as some lawmakers argued during the last Great Tax Non-Debate in 2003, it’s too late, as another Carole once crooned.

“You’ve got to change programs,” Vilardo explained. “You’ve got to identify the people who would have to pay the tax. They have to be notified. Forms have to be taken care of. Regulations have to be adopted. That is not something you can do to get an immediate infusion of revenue.”

And yet the problem remains, a problem neatly encapsulated on the same program by the man who headed the last tax study as a precursor to the 2003 legislative nightmare.

“The economy has fundamentally changed,” said Guy Hobbs, a local fiscal analyst and consultant. “The tax system has not fundamentally changed. If you go back to 2003 and what has been referred to as the largest tax increase in our history, one of the taxes that they put into place yields virtually no dollars today.”

He was referring to the real property transfer tax, which raises a lot in boom times, but drops off a cliff in a state that has the highest rate of foreclosure in the country.

It’s time to rethink how that was done and whether the base should be broadened in the way that Vilardo suggests. The problem: There isn’t enough time.

So, consequently, there is little hope.