Here’s a lasting solution to taxes
November 24, 2002
The Band-Aids are coming! Once again, with an infinite lack of wisdom reserved only for politicians who are dedicated to misleading voters and who lack the political courage to bite the bullet and really solve Nevada’s problems, we now have a governor relying on a so-called Task Force on Tax Policy to take himself off the hook, predictably recommending the cowardly way out.
No leader, except for political window dressing, would need a task force to come up with such obviously short-sighted, temporary solutions. If this task force represents the best thinking Nevada has to offer we are, indeed, in trouble. We hired this governor to have some ideas of his own, but all I see are special interests.
Everybody with half a brain knows that Nevada’s fiscal problems are caused by too narrow a tax base. I know it! You know it! God knows it! This same crisis has surfaced at least three times since 1983 and has been widely discussed, and then dismissed for political reasons. Nevada’s policy of relying mostly on gaming revenues, sales taxes, and limited property taxes because our state is 84 percent owned by the feds is no longer affordable.
As we grow, our tax base is too narrow to dampen the ups and downs of our natural economic cycles. The Band-Aid fixes being proposed by this task force are mostly a replay of the past 20 years and are not long-term.
Yes, there is one solution that would work for at least 25 years and would significantly broaden our tax base. It is the least distasteful of all options as it doesn’t unfairly target specific groups such as drinkers, smokers, businesses, etc.
It affects everybody and is very progressive. I’m talking about adding most services into our sales tax base. We are now as much a service-based economy as we are a goods economy.
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If we added services into our sales tax base and cut the sales tax rate back to 4-1/2 percent, we would solve our fiscal dilemma for 10 years. Then we could gradually return the sales tax rate back to 6 1/2 percent over the next 15 years as needed.
What’s the problem with this idea? It’s innovative. It’s different, and therefore risky for politicians who aspire to higher offices.
This could affect the governor and every legislator who would vote for it. They’d either be heroes for solving our fiscal problems with a genuine, lasting fix, or heels if they failed to solve it as painlessly as you citizens expect.
Is it new? Hell, no! The states of Hawaii and Washington have been taxing services for decades. That’s how Washington avoids a state income tax even though it offers more freebie services than just about any mainland state.
And there are also three other states that have sales taxes on services.
Would there be any exceptions? Yes, most states taxing services do exempt some, such as medical and funeral. I personally think it would be draconian to tax anything having to do with illness or death, although Hawaii does.
Some states exempt legal services because the lawyers raised so much hell about it. Why lawyers think they’re above collecting sales tax on their services is beyond me. As wealthy people use the most legal services, taxing those would be in keeping with progressive tax policy. Higher income families always require more and costlier services than do middle income and poorer families. Democrats should love it!
Has Nevada ever seriously considered a sales tax on services? Yes! Our Legislative Counsel Bureau research department is loaded with data, most of it favorable, as being the best way to solve our fiscal problems over a long term, without targeting groups that don’t have the lobbying power to resist the tax crap being advocated by the Governor’s Task Force.
Responding to my 1983 Assembly bill, AB 157, in which I introduced a sales tax on services to block a horrendous property tax increase being sought by then Gov. Richard Bryan, the LCB did a masterful job, as it always does, of gathering data on service sales taxes. For the record, on two occasions the tax committee split-voted “for” and “against” passage.
I sincerely believe an amended version of AB 157 would have passed had Gov. Bryan not put out the word to his fellow Democrat, Taxation Chairman Paul May, to let my bill die in the drawer. It did.
After all, the governor’s future would soon call for him to run for the U.S. Senate, and he didn’t want to risk being identified with a “new” tax.
My next column will show you what should and should not be taxed and the reasons why; that is, if we were to double our sales tax base by including services.
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