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May 30, 2015

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analysis:

Government gridlock compels Nevadans to pursue progress via initiatives

Labor is preparing a business-tax ballot initiative.

A conservative businessman is threatening initiatives to raise taxes on mining and gaming.

A maverick attorney is proposing an initiative calling for sweeping changes to the state tax structure, creating what would be, in effect, a parallel government to that run by lawmakers and the governor.

These initiatives, pushed by groups and individuals of varying ideologies, from very liberal to very conservative, suggest a state that has lost faith in the ability of its political leaders and institutions to get things done, or at least big things.

Nevada is a wounded state, with a busted housing market and highest-in-the-nation unemployment. One pillar of its economy, construction, is gone and won’t be back anytime soon. Another, gambling, has come back, but is seeing competition spread across the country and world.

Who will do something about it?

Gov. Brian Sandoval, a Republican in his first term, has taken a cautious approach to the state’s tax structure, focusing instead on remaking the bureaucracy of economic development. He campaigned on a promise not to raise taxes. He notes some modest economic progress — an unemployment rate that peaked at 14.9 percent in December 2010 has dropped to 13 percent.

Respected legislators have been forced out by term limits or are pursuing ambitions for higher office.

And gaming, which has served as a guiding hand in the state’s political process, is fractured as never before.

That leaves discontented individuals and interests looking to voters.

“These initiatives show people feel they have no choice but to go around the Legislature because they’re not going to do anything,” said Kermitt Waters, the attorney who is pursuing a broad tax-and-spend initiative. Waters, a Democrat, has partnered with a conservative political operative, Chuck Muth.

Even members of the establishment, which has railed against initiatives, calling them messy, error-prone direct democracy, understands the frustration.

“There’s a frustration in the minds of many that there’s no significant action in Carson City,” Billy Vassiliadis, CEO of R&R Partners, one of the state’s leading lobbying firms, said. “Whether you’re pro-tax or anti-tax, pro-spending or anti-spending, there’s a lack of political action.”

The same sentiment is found in Washington, D.C., he said. “It’s a sign of political times. We’re in a political culture of obstruction.”

The AFL-CIO is writing a petition to put a broad-based business tax on the ballot. The state teachers union has signed onto the coalition, but gaming, mining and other businesses are so far uncommitted.

Monte Miller, a conservative businessman, is preparing initiatives to raise gaming and mining taxes. While he has declined to comment in depth about his proposals, many observers see it as a warning to mining and gaming to not support labor’s business-tax initiative.

It takes a two-thirds majority for the Legislature to raise taxes, a point of frustration for pro-tax groups who have been particularly outraged at the state budget cuts since 2008.

Danny Thompson, head of the state AFL-CIO, the state’s largest labor group, has said his ballot initiative is the direct result of his frustration with the legislative process.

Former Sen. Randolph Townsend, who was forced out by term limits in 2009, said the Legislature is less equipped to handle big policy questions because of a lack of personal relationships.

Randolph Townsend

Randolph Townsend

While lawmakers used to know each other’s families, socialize, go to the gym, “in a 120-day session you don’t leave the building — you don’t have time to leave the building — so you don’t build those relationships,” he said.

The result? “This new vitriolic feeling that if the other party has a good idea about A, you don’t want to say that’s a good idea. And if the opposition party has one about B you don’t want to give them credit for that. So they fight instead of getting a 30,000-foot view and saying, ‘What do we want to accomplish here?’ ”

Townsend helped pass the state law in 2005 that required ballot initiatives adhere to a single subject, a provision that has been used to challenge initiatives in court. It’s a provision that Waters is challenging in court before introducing his constitutional amendment initiative that would, among other things, eliminate residential property taxes and raise the mining tax to 20 percent.

The single-subject law came in response to some confusing ballot initiatives in the early 2000s, Townsend said.

“The public is busy,” Townsend said. “I don’t think it’s unreasonable to ask the people to hold to a single topic. If you want to do more you can either have multiple initiatives or run for office and if you’re elected you can deal with all the issues you have concerns about.”

But Waters said the single-subject restriction has been interpreted too narrowly and wielded too often to disqualify nearly every initiative since it was adopted. Waters said that without overturning it he would be unable to get his initiative on the ballot.

Prior governors have taken leading roles in shaping the state’s tax structure. In the late 1970s, voters in Nevada approved a stiff cap on property taxes, following California’s Prop. 13. The Legislature and then-Gov. Bob List stepped in and enacted legislation that shifted taxes and capped the rates in the state, albeit at a lesser level than called for in the initiative. The following year, voters defeated the initiative they had overwhelmingly passed two years before.

In 2003, then-Gov. Kenny Guinn tried to change the state’s tax structure, with a proposed gross receipts tax on businesses. While that failed, the Legislature raised taxes by over $700 million, mollifying labor groups and advocates for increased spending.

Dale Erquiaga, senior adviser to Sandoval, warned against blaming the system or any leader.

“Those folks who think the system is broken may be saying that because they’re losing,” he said. “Their ideas may not be carrying the day.”

The governor is open to new tax structures, he added. “He would be willing to hear them. The ideas have not been presented,” Erquiaga said.

Sandoval was at ribbon-cutting ceremonies for three businesses last week, all of which had moved here from California, where a significant portion of state tax policy and spending is controlled through initiatives. “The initiative process is a bad way to make tax policy,” Sandoval said.

While open to proposals to change the state’s tax system, Sandoval doesn’t believe a major infusion of money through tax increases is necessary, Erquiaga said.

“Does gaming pay its fair share in Nevada? Yes. Does mining pay it’s fair share? The governor has said yes,” Erquiaga said. “The current fiscal situation is based on the Great Recession, not Nevada’s tax structure. We should respond in kind and focus on job growth.”

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