State of denial

Sunday, July 20, 2008 | 2:06 a.m.

Nevada’s bond rating was downgraded last week by investment analyst Moody’s, which is bad news for a state going through a budget crisis.

The influential company changed its outlook on Nevada from stable to negative in a gloomy report cataloging the state’s budget woes. The rating is important because it is an indication of the state’s ability to pay back its debt and is used by investors as a guide.

Most of the problems are out of Nevada’s control — high oil prices that hurt tourism, the soft housing market and the nation’s general economic malaise.

But Moody’s did note one thing the state could do to help its rating: Change the tax structure. The state budget hangs on tourism, which can be wildly unpredictable, while many businesses go virtually untaxed. That means national economic slowdowns can create budget crises here, as is the case now.

There have been a number of plans over the past several years to balance Nevada’s tax system, but they have been beaten back by business interests and politicians such as Gov. Jim Gibbons, who has held fast to his no-new-taxes pledge.

Gibbons has said now is not the time to talk about taxes, pointing to the weak economy. Of course, for Gibbons, there has never been a good time to discuss taxes, even in the good times. The governor has been virulently anti-tax and has clung to his no-new-taxes pledge, taking it to ridiculous extremes. For example, he has argued against raising fees for driver’s licenses, even though the cost of producing them has gone up.

In the meantime, the state’s tax system doesn’t bring in enough revenue to pay for necessities such as schools and highways.

Moody’s noted that further reliance on the current tax system could cause more problems, which apparently is no surprise to anyone but our governor. This report should be a wake-up call for state leaders. Now is the perfect time to talk about the broken tax system — and fix it.