Las Vegas Sun

August 3, 2015

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Sun Editorial:

Time for a solution

Overhaul of tax system needs to be at center of legislative debate

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Assembly Speaker Marilyn Kirkpatrick said she would start an “open and frank discussion” about taxes on Day 2 of the 2013 Legislature, and she fulfilled that promise. Lawmakers took their first stab at the issue Tuesday.

But that’s only the start of the discussion. Kirkpatrick expects to take on the state’s antiquated tax structure. Given the typical political antipathy toward taxes, this is a gutsy move, but the state tax code desperately needs an overhaul.

There’s an inherent inequity in the system, notably the state’s reliance on regressive taxes. And the tax burden is borne by a few industries. That has led to volatile swings in state revenue that have hurt already underfunded public services.

Not that this is news. A stream of reports and studies over the past four decades have reached similar conclusions. A 1979 report, for example, expressed concern that tax revenues were declining because they were “not sufficiently responsive to population growth or inflation.” The report recommended restructuring the tax system to better handle the growth and meet the state’s needs.

The problems are clear, but the political will has been lacking. Instead of dealing with the real problems, the Legislature has, time and again, resorted to scores of incremental fixes and then pushed the bigger issues off by asking legislative committees, analysts and blue-ribbon panels to once again study the issue. Interest groups have filled the leadership void and tried to add or repeal levies via the initiative process, but that is a poor way to make tax policy.

This has been the cycle for years. Lawmakers keep avoiding the hard decisions in favor of kicking the proverbial can down the road. In her opening speech to the Assembly, Kirkpatrick put the situation in blunt terms.

“Will we be a state that continues to apply nickel-size solutions to dollar-size problems, or will we finally recognize that we just can’t balance our state on the backs of just a few industries?” she asked.

That’s the critical question of the session: Will lawmakers rise to the task?

Politically, it’s better to avoid the issue and the risk of being labeled as a tax-and-spender. Especially in Nevada, which for nearly 100 years has identified and sold itself by its low taxes. There’s no income tax, and many businesses pay virtually no taxes.

National studies have shown that Nevada’s per-capita taxation is below average, but those figures don’t tell the whole story because they don’t take into account the taxes from tourism. A 2008 study by Applied Analysis conservatively estimated that tourists to Las Vegas paid $1.6 billion in state and local taxes. The report said that tourists, who don’t require the same level of services as residents, have “helped Nevada preserve among the nation’s lowest personal and business tax burdens.”

The resulting low taxes have meant a lower level of services and quality of life for those of us who live here.

Talk of reforming the tax system has undoubtedly sent shivers through some politicians, but Kirkpatrick isn’t talking about raising more tax money. Although she hasn’t offered many specifics, she has talked about a “revenue-neutral” approach that would broaden the tax base and lay the groundwork for a more stable system.

So far, some liberals have bristled at the lack of new revenue, and some conservatives have expressed a willingness to discuss such a plan.

The political reality is that a revenue-neutral plan has the best chance of succeeding. It takes two-thirds of the Legislature to pass a new tax, so any legislation will need Republican support. And a revenue-neutral plan will be the only type that has a chance to pass muster with Gov. Brian Sandoval.

The task won’t be easy, but if Nevada is to have any sort of stability in the near future, it’s going to take tough decisions like this — and lawmakers are going to need to find more than a nickel’s worth of political will.

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