Study new, conclusion not

Thursday, May 13, 2010 | 2:01 a.m.

A panel examining the state’s revenue system is expected to find what several others have previously concluded: Nevada’s tax system is unstable and needs to be overhauled.

The 20-member panel is scheduled to meet Friday to discuss a proposed executive summary, which includes fixing the broken tax system as part of a series of recommendations on improving the state’s quality of life. A draft of the summary, done by the international consulting firm Moody’s Analytics, was released this week. It outlines several areas for improvement, as well as ways the state can track its progress. The final report is scheduled to go the Legislature this year.

Beyond the tax system, the underlying problem in Nevada is this: People want a high quality of life and strong government services, they just don’t want to pay for them.

Nevada’s tax rates for residents and businesses are among the most enviable in the nation. The state’s de facto tax policy has been to let the tourists pay. The problem is the money that was coming into the state’s coffers during the boom years was never enough to cover the cost of growth, much less basic services. The result has been well documented. The state’s services are often, at best, mediocre. There have been numerous studies that have shown that Nevada often lags behind the national average on any number of indicators, from education to social services.

Over the past few years the tourism industry has been badly hurt, and the state has seen tax revenue plummet, forcing several major budget cuts. Economists and analysts don’t see a rapid return of the good times Nevada once had, meaning the state will continue to struggle to provide services. So now what?

The Moody’s report suggests, as have others, that economic diversification is one way to spur the economy forward. But the state is in something of a Catch-22. Some people say that a low tax rate is the key to economic diversification and add that Nevada can’t attract businesses if the tax rate changes. What they fail to understand is businesses considering relocating look at more than a state’s tax rate — they want good infrastructure, schools and services. And, because of the historic funding problems, Nevada doesn’t rank well against other states in those categories.

It is clear that the state tax system is broken. Thousands of businesses go virtually untaxed. Yet there has been little movement over the years to do anything about it. Beyond the tax problem, the state has a vision problem: Mediocrity has been acceptable.

The vitriolic anti-government, anti-tax crowd would make it seem that government budgets are flush with cash and go toward frivolous services. They also loudly complain that the world will come to an end if the tax system is adjusted to provide fairness. Although none of that is true, state leaders have been loath to act because of the false perceptions that exist. The result is that Nevadans have suffered.

That can’t be acceptable anymore. State leaders have seen study after study confirming the same thing. Now, it’s time for action.