Las Vegas Sun

September 26, 2017

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Services tax is dead; Democrats’ hopes for major tax reform dim

At the start of the legislative session in February, Democrats promised — at the very least — an early and public discussion on tax reform.

Beyond just a discussion, early bipartisan support seemed to be forming around a sales tax on services — potentially applying it in a revenue-neutral way by lowering the overall rate of the tax.

But with just 41 days left, Speaker Marilyn Kirkpatrick, D-North Las Vegas, said any effort to pass a services tax is dead and sounded less than optimistic about the chances of any kind of broad-based business tax making it to a vote.

Kirkpatrick blamed a flurry of press reports on the services tax for its demise.

“You killed it,” Kirkpatrick told a Sun reporter last week. “You got all the Democrats against me on it before I even had a chance to explore it, so I didn’t even explore it.”

The idea of expanding Nevada’s sales tax to services such as legal advice, accounting and hair dressers was originally introduced in Nevada by a Democrat last session. But in the past two years, Republicans around the country have launched an effort to move away from income taxes and toward consumption taxes such as a services tax.

Crafting a services tax also is potentially difficult because various constituencies would demand an exemption.

In an effort to potentially set the debate up for the next legislative session, the Senate is considering an interim study on creating a services tax.

Kirkpatrick said she next had hoped to have a discussion on Assembly Bill 279, a measure sponsored by Assemblywoman Peggy Pierce that would create a corporate income tax. Kirkpatrick described Pierce as “the most liberal person in this building.”

That discussion also never occurred.

“You know everything is still on the table,” Kirkpatrick said. “We still have 40 days, but you know it depends on misinformation getting out there, and people become upset and concerned, and then we don’t have the ability to have that dialogue.

“We never got to the conversation (on the services tax) because it spiraled out of control. We were going to look at AB(279), and we never got there because people across the spectrum were in fear of what it could mean.”

That doesn’t necessarily mean Kirkpatrick has dropped the idea of tax reform altogether.

Kirkpatrick remains determined to stick to her original goal of “cleaning up” the tax code by reconsidering every tax exemption or abatement on the books.

She also wants a complete overhaul of the live entertainment tax, which is rife with confusing definitions and exemptions. Her live entertainment tax measure is expected to be introduced in the coming days.

“It’s actually cleaning up the statute,” Kirkpatrick said. “There’s not a lot of options for taxes on the base when we can’t get past the conversation (stage).”

Kirkpatrick had no estimate for how much revenue her proposed changes would net the state, even as Democrats seek some way to fund an additional $300 million in education spending.

“For myself, it’s not about the revenue,” Kirkpatrick said. “It’s about a long, steady course of a tax structure that works. I’ve never looked at it as dollars. It’s policy.”

But Kirkpatrick did acknowledge the state has immediate needs.

“We probably have a billion dollars worth of things we’d like to fund,” Kirkpatrick said. “Look at our (information technology) system. Look at the infrastructure on our highways. Look at education. Look at some things within economic development. Class size reduction is a top priority.

“So we have made some huge goals on policy decisions that matter. The funding doesn’t necessarily have to be this session as much as it can be going down the road.”

Not all Democrats have given up hope that additional tax revenue can be created this session.

“I still think taxes are not off the table this session,” said Sen. Debbie Smith, D-Sparks. “We’ve committed to properly funding education this session.”

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