Legislative tax committee proposes change in property tax cap
A legislative study committee voted Friday to recommend the 2003 Legislature raise the maximum property tax local governments can charge by 40 cents.
Local officials say it isn’t actually an increase, but the change gives back to the counties what the Legislature took away two years after imposing a property tax cap at $3.64 per $100 of assessed valuation in 1979.
Lawmakers did so to stave off a possible voter-approved mandatory property tax cut modeled after the one approved in California the year before.
When the cap was created 23 years ago, it didn’t include the 15 cents collected by the state for public works projects. Two years later, lawmakers added another 25-cent property tax levy to the 50-cent tax already imposed for public schools. Lawmakers put 75 cents for schools as well as the 15 cents under the cap.
At the time, they said it wasn’t a problem because most local governments were charging far less than the cap allowed.
Now many local governments in Nevada are nearing the cap because of school and construction bonds as well as rising costs to provide governmental services at the city and county level. Part of the problem, local officials say, is that the state has pushed more and more responsibilities and costs down on the counties and cities.
The study committee headed by Assemblyman David Parks, D-Las Vegas, voted to request legislation to raise the total cap to $4.04 per $100 of assessed valuation. The proposed legislation would then remove the 15 cents reserved for the state, the 25 -cent and the 50-cent school taxes from the cap.
Phil Stoeckinger of Henderson said passage of the bill would set the local government property tax cap at $3.14 per $100 of assessed valuation and separate local funding from the 90 cents dedicated to schools and state bond payments.
“The main thing it does for local government is it says you’ve got a cap that’s yours,” said former Las Vegas Finance Director Marv Leavitt, who is serving as a technical adviser to the study committee.
County officials want the separation to protect them from a possible push by the state into the property tax revenues.
Bob Hadfield, executive director of the Nevada Association of Counties, said cities, counties and schools would still have to deal with each other when seeking to raise taxes but they wouldn’t have to worry about the state moving into the picture and forcing them to cut back their share to avoid going over the cap.
Several lawmakers during the 2001 Legislature as well as Gov. Kenny Guinn made suggestions the state might want to move in on the property tax to help balance its growing budgetary needs.
“It’s unrealistic to assume the state can continue to operate without property tax,” Hadfield said. “But it should not be done by forcing local governments to reduce theirs.”
Guy Hobbs, former Clark County finance director who heads the Governor’s Task Force on Tax Policy, said the group is considering whether the state should claim a larger piece of the property tax to help fund its operations.
Hadfield said the plan providing another 40 cents worth of growing room for local property tax revenues would be important to small counties such as Mineral and Lincoln which are at the maximum now. Other counties such as Carson City and Douglas are well below $3.64 per $100 of assessed valuation and Hadfield predicted local officials would be very restrained in raising taxes unless they could justify the need.
The study committee also voted to request a bill draft to change the current “per gallon” taxes on gasoline to a floating rate tied to the Consumer Price Index. Leavitt told the study committee the current system requires legislative action to raise the tax periodically and adjusting it according to the price index would provide a more realistic revenue stream for road and street repairs. Under the proposed legislation, the taxes would never be allowed to increase more than 4 percent in one year.
The bill drafts come just two days after the Governor’s Task Force on Tax Policy voted to seriously consider recommending a tax on gross receipts of all businesses operating in Nevada. The tax could generate as much as $350 million a year to help balance the state budgets. But Hobbs said the plan would exempt all businesses making less than $200,000 gross a year and giving Nevada businesses a credit to offset the per employee business activity tax they already pay would effectively exempt 60 to 80 percent of businesses from the tax.
The two committees are working on the tax issue because of the state’s growing revenue deficit. Experts say the existing tax structure won’t pay for growth and those deficits will continue to get larger each year.
Analyst Jeremy Aguero told the task force earlier this week he now estimates the state will be about $400 million short for the fiscal 2004-2005 biennium. He said the deficit could be as much as $4.6 billion total over the next decade unless the state’s tax system is changed dramatically.