Radical Common Sense

Our schools are wounded, and further cuts won’t stop the bleeding. Could it be time to increase our property taxes?

As legislators sort through Band-Aids for the gaping holes in the Nevada state budget, the usual revenue suspects are on the table: room taxes and other pass-along-to-the-tourist dandies. But this time, we need more than pennies in the piggy.

The arguments have been passionate and predictable for the “to tax or not to tax” debate. One thing is certain: Reno’s anti-tax puppet, Gov. Brian Sandoval, will face the ire of the education community for years to come if he sticks to his slim $5.8 billion budget and “we all sacrifice” mantra.

Don’t get me wrong: I actually like some of what the Governor of Reno is proposing. Various Assembly and Senate bills are screaming for teacher accountability and a pay-for-performance model. That’s good. Let’s stop throwing money into a mediocre-at-best model. Teachers should be able to show student progress; it’s not an unreasonable request from taxpayers and it scratches at the surface of reform.

I also don’t believe in taxing businesses. I’ve been a local business writer for nearly a decade and admit to a soft spot for entrepreneurs and risk-takers. It seems stupid to penalize someone for having the guts to hang out a shingle in this environment.

But I digress. I’m proposing a hefty property tax hike to fund education. Nevadans have the potential to rake in an extra $170 to $280 million in the next two years for education, and it may only cost each household $25 a month—less than a gym membership.

The recession started as a housing problem whose roots spread deep and upended other industries. Mortgage houses tanked almost immediately. Soon enough, we all felt the sting. Once we could no longer use our homes as ATMs, business creation sputtered. The consumer—whose impulse we rely on for 70 percent of the great capitalism experiment—got nervous, spending plummeted and normally ambitious businesspeople decided to stay on the sidelines for a few cycles.

But now Valley residential real estate has become a sideshow, a piece of America’s fabric. The huge plunges in valuation on the residential side seem to be behind us, and we’ve calculated a flat real-estate market into our workaday lives.

So why not tax the very sector that now makes us yawn? Increase the tax on residential real estate by 8 percent per year for the next two years, the highest cap instituted by 2005 legislation, back when we all worried about runaway home prices and cashing $300 surplus checks.

In Clark County, there are some 478,000 housing units. According to the economic research firm Applied Analysis, an 8 percent property tax hike would create roughly $86 million per year for the next biennium. If we extended it to commercial real estate, we’d see $143 million and $136 million, respectively, for the next two years, or almost $280 million. All of it can and should go to a leaner, meaner education system.

My neighborhood’s tax bills range from $100 to $150 a month. With the change I’m proposing, I would see between $8 and $12 a month in additional taxes the first year, and another $8 to $12 increase the next. After that period, I’d pay at most $25 a month more than I do now. Even with the increase, the Valley can still keep its low-tax appeal. Just ask anyone from New York or Chicago.

Also, real estate experts have claimed for the past two years that homes are selling at prices 20 to 30 percent below replacement cost, or the cost of blowing them up and rebuilding the same houses on the same lots. Why not take some of the future appreciation now? At the end of the biennium we set a new floor, guarantee ourselves at least this amount of funding for the next biennium and let property values play catch-up. Eventually, they will—and we can resume the beautiful reciprocity of increasing home values, increased tax revenue and better public services. All the original 2005 tax caps can still apply.

One more detail to ponder: For the better part of the past year, the Greater Las Vegas Association of Realtors has been reporting that cash buyers make up about 50 percent of the buyers in this market. That number is increasing. There’s no secret that out-of-town investors are buying up Southern Nevada. Like it or not, those outsiders to whom we’ve been marketing our sin for many decades will eventually own more than half of our city, if they don’t already. There’s a good chance that most of this increase will be paid by someone not living in Nevada anyway.