Let’s Study the Tax Structure … Again

The Nevada Supreme Court has interpreted the law, and it was the last thing legislators needed–and the first thing all of us needed.

The seven justices unanimously agreed that the Nevada State Education Association’s petition for a business tax passed constitutional muster. So, state lawmakers must consider adopting it within the first 40 of the 120 days they will meet in Carson City. By March 15, they must pass the tax or it goes on the ballot in 2014.

The tax would be a 2 percent “margins tax.” Businesses would be exempt from paying on the first $1 million they earn. They also could deduct some expenditures before figuring out what they would owe.

The problems with the tax are numerous. One is that two-thirds of the legislature must pass any tax hike. Getting that number seems as likely as prohibitionists making Oscar Goodman their poster boy.

Another is that Governor Brian Sandoval opposes any new taxes, which is nothing new: he said that throughout his 2010 campaign, then shocked everybody by sticking with it at the 2011 legislature. Then, instead of sticking to his avowed principle, he changed his mind when the state high court ruled that the state couldn’t take certain funds from southern Nevada’s Clean Water Coalition to pad its budget, meaning that he would accept the continuation of taxes that were supposed to expire. Now he’s back to opposing new taxes, although he wants to spend more money on education, especially English language learning. Can you spell reelección?

There’s also the problem that this tax was proposed by the group representing school teachers, who are, as we know, already overpaid and underworked. Just ask the Republican Party.

The biggest problem, though, is that it doesn’t solve the real problem, which is Nevada’s tax structure. Assembly Speaker Marilyn Kirkpatrick and State Senate Majority Leader Mo Denis have announced that they want an examination of that.

Well, Kirkpatrick and Denis have made clear that they are more interested in solutions than partisanship, and bless them for it. But studying Nevada’s tax structure would be as big a waste of time as sitting outside Caesars Palace and waiting for the statues to move.

In the late 1980s, the legislature ordered a study. It showed that the tax system implemented in 1981 didn’t work. Republican Governor Robert List and the Democratic legislature (majorities of 15-5 in the senate and 26-14 in the assembly) feared passage of an initiative modeled on California’s Proposition 13 that limited taxes on real estate, and cut property taxes while raising the sales tax. They were just in time for a recession and the state nearly missed a payroll shortly thereafter. Since then, Nevada has run on projections, meaning that the Economic Forum has told the governor and legislature what the numbers will be, based on its evaluation of how the economy is likely to be, for a two-year period—a ridiculous way to run a state even when it has an annual legislature. The first in-depth study of Nevada’s tax structure said that was unwise. So have several studies since.

Perhaps you need additional proof that this is unwise. Here it is: who else is looking at doing something like what Nevada has done. Virginia’s governor, Bob McDonnell, suggested replacing the gasoline tax with a sales tax hike and annual fee for hybrid and electric cars, thereby penalizing people who try to save gasoline. Louisiana’s Bobby Jindal–who recently called for Republicans to quit being the “stupid party”–and GOP lawmakers in North Carolina hope to eliminate corporate and income taxes. And Arthur Laffer, the alleged economist who came up with the unworkable Laffer Curve—better known as the Laughable Curve because it destroys economies it’s supposed to cure—thinks it’s a good idea. Yes, they can replace Nevada at the bottom of every list that measures economic growth and social services.

Ideally, others will learn from Nevada’s errors. Ideally, the threat of the Nevada State Education Association initiative will inspire a little discussion and a lot of action to rectify a situation that has hamstrung this state for three decades. Ideally, the author of this article will wake up tomorrow looking like George Clooney. Don’t bet on any of those.