Commentary by Bob Thomas: No more Band-Aids. Let’s solve the problems
For the Nevada Appeal
“Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable,” John Kenneth Galbraith
Being the “father” of sales tax on services a far as Nevada is concerned, I am compelled to respond to Ron Peterson’s column in the May 22, Nevada Appeal. In 1983, my first term as Carson City’s District 37 Republican assemblyman, I introduced a bill creating a sales tax on services because we had exactly the same revenue shortfall problem then as we have today and have had many times. I did it not because I am a tax-and-spend type. I did it because I could see, even way back then, that Nevada’s tax base was (is) too narrow – essentially gaming and sales tax on goods. That is the main reason why our tax revenues suffer from economic ups and downs. By broadening our tax base we can significantly dampen those ups and downs.
My bill was revenue neutral. It called for cutting the existing sales tax rate from 6 percent to 3 percent (50 percent) on goods, and then adding services in at 3 percent (50 percent), broadening the base. In those days, my research, along with the Legislative Council Bureau’s research, showed that at the same tax rate, goods and services would bring in about equal revenue. But that is no longer true. Today, taxing services will bring in more revenue than does a goods tax at the same tax rate. We are now more of a service economy than a goods economy.
Now, back in 1983, both Assembly and Senate members mostly supported my bill, that is, with the exception of the Senate Majority Leader, a Democrat, who told me he would never let my bill come to the Senate Taxation Committee for a hearing. He said he wanted no part of any new tax. I tried to explain that it wasn’t a new tax, it was an extension of our existing sales tax. But he would have no part of it. He refused to discuss it. My bill died with him.
Getting back to Ron’s column, I want to say that I agree with most of what he had to say, especially the part about government’s tax-taker mindset as opposed to we taxpayers mindset, perpetuating old and creating new spending programs. Government spends far too much on failed programs, Nevada’s public education system being the most prime example.
Now, the only other choice for broadening our tax base besides a sales tax on services is a state income tax on individuals and businesses. The state of Washington has avoided a state income tax only because it has long had a sales tax on services. If you really want to stop new businesses from coming here, give us a state income tax. Yes, I can remember when gaming tax provided almost all of our general fund revenue, but years ago Nevada outgrew gaming’s ability to do that. So, Ron Peterson, I hope Gov. Sandoval will see the light and leave a legacy of having solved our revenue problem for years to come. Adding services to sales tax will do that.
Concerning Gov. Sandoval’s pledge not to permit the raising of taxes, I can only say that I support him all the way except for this single exception, that of broadening our sales tax base. True, with or without services, sales taxes will continue to gradually rise as they always have. But why miss this opportunity to ease the pain of economic fluctuations over which we have no control? No economic system can provide uninterrupted growth. I can assure Gov. Sandoval that if he changes his mind on this issue, he will prove to his constituents that he isn’t above learning as he goes along, and two years from now he will have proven himself a hero.
• Bob Thomas was the founder and CEO of a division of Emerson Electric, a Fortune “500” company. He has served on the Carson City School Board and in the Nevada State Legislature.adsf