In recent days, we’ve seen some startling news on Nevada’s state of business. With a new lawsuit challenging the state’s status quo for funding public education and a global pandemic challenging our typical economic “bread and butter”, we need to talk about taxes. As taxing as it can feel, we need to realize that Nevada’s tax system isn’t all that “business friendly” when it comes to the business of making this state function for all its residents.
I originally wrote and posted this on February 6, 2013. As always, I lightly edited it to fix language, format, and broken links.
In the first moments of the new session of the Nevada Legislature, there was hope. There was talk of reform. There seemed to be opportunity.
But now, there’s just the same old pile of nothing. “Revenue-neutral” is the new talk of the town in Carson City, and it has education advocates and other progressives wondering what’s the point.
[Then] Assembly Speaker [and now Clark County Commissioner] Marilyn Kirkpatrick [D-North Las Vegas] recently told the Las Vegas Sun, “I want to get rid of the sunsets [or expiration dates on the 2009 tax increases] altogether.” The Sun then noted, “Kirkpatrick did not detail a specific proposal for broadening the tax base. But she said expanding the sales tax to include services — such as hairdressing, accounting and legal advice —would be a realistic approach. To make it “revenue-neutral,” the sales tax rate would be lowered.”
Yeah, no. “Revenue-neutral” doesn’t fix our revenue problem.
So that’s the big idea? Charge sales tax at the hair stylist and the lawyer’s office? Seriously? And the Nevada Legislature’s leaders wonder why some individual legislators and many grassroots activists are so underwhelmed by this “reform”?
Sorry, but charging sales tax at the accountant’s office doesn’t address the core of Nevada’s chronic revenue shortage. There are far deeper problems in Nevada’s tax and budget structure that must be addressed. Taxes here are incredibly regressive, hitting the working poor and middle class the hardest. And as long as schools and other parts of Nevada’s public infrastructure are chronically underfunded, we’ll never attract the businesses we need for a stable and healthy economy.
Solutions are available. And in fact, the solutions are likely right on top of legislators’ desks. SJR 15 [from the 2011 and 2013 sessions] addresses the serious shortfall that is the enshrinement of mining industry tax loopholes in the Nevada Constitution. (It’s a key reason why multinational mining conglomerates pay very little in Nevada taxes.) In addition, “The Education Initiative” offers a corporate margin tax modeled after the system in that socialist utopia that is Texas. (No, really.) At least these policies will actually provide real progress on tax reform if passed.
How about some “big, structural change” for Nevada’s tax system?
It’s not just hardened lefties saying this. [The late philanthropist and TV station owner] Jim Rogers also chimed in early this morning and noted, “Nevada will never free itself from the influence of the horse and buggy structure and capabilities of its governance system unless it totally restructures and redefines government’s role to support the vast interests of the many faceted Nevada population.”
We must face the facts. The Nevada of today is far different from the Nevada of the late 19th century. We’re mostly an urban state now. We require public schools, freeways, and hospitals. It makes no sense to continue legalized corporate tax evasion while tinkering with incredibly regressive and narrow tax policies that hit the middle class, the working poor, and small businesses the hardest.
So why continue this ridiculous “revenue-neutral” kabuki theater? Yes, we already know Governor Brian Sandoval (R) and Republican legislators refuse to acknowledge Nevada’s 21st century reality. Just solve the problem by sending SJR 15 and “The Education Initiative” to the voters. If the Legislature can’t or won’t fix Nevada’s serious fiscal problems, then “We the People” must. The time for rearranging deck chairs on this Titanic in Carson City is over.
Postscript: What’s the deal with Shea v. Nevada?
Speaking of the late great Jim Rogers, the Rogers Foundation and Educate Nevada Now announced their support for the parents of public school students in Clark, Washoe, and White Pine counties who’ve filed in Shea v. Nevada. They filed suit in Carson City last week, and they’ll be arguing in state court that the state government has violated state law by failing to adequately fund and support public education.
As I’ve explained before, then Governor Brian Sandoval did ultimately come around to embrace some progressive tax reform to better fund public education and the rest of the state’s infrastructure in 2015 [after that “Education Initiative” lost in the 2014 election]. But as big as that felt five years ago, it did not fix all the structural problems that originated with the 1967 “Nevada Plan” that was developed back when this state was more rural, far less populated, and better positioned to get by on narrow bands of revenue, such as sales tax and the gaming tax.
As we discussed last August, when CCEA threatened a teachers’ strike and state leaders from Governor Steve Sisolak (D) on down tried to pass the buck to CCSD, “The state has generally neglected to provide CCSD and other school districts with enough funding to cover standard expenses, let alone the 3% teacher pay raise that Sisolak promised in January  or the ‘column advancement’ professional development reimbursements that CCSD administrators long promised teachers.”
Postscript, continued: We need to think bigger. We need real solutions.
CCEA has since reemerged with two tax initiatives they’re hoping to take to Carson City in 2021 and/or the ballot box in 2022: a gaming tax hike from 6.75% to 9.75%, and a state sales tax hike from 2.6% to 4.1%. While both will likely bring in more revenue, we’re already in this hole because we’ve depended upon such narrow bands of revenue to keep us afloat. And as the COVID-19 coronavirus is all too cruelly reminding us all, Nevada can’t and shouldn’t rely on tourism and gaming to come to our rescue any more.
And of course, we continue to field questions over this or that “magic bullet”, like marijuana tax revenue and a state-run lottery, will magically solve this problem. Short answer: Hell, no. Longer answer: SB 545 basically provided extra revenue to help Sisolak fulfill his 3% teacher pay raise promise (and as we discussed above, it still hasn’t been enough), and California’s allegedly “game-changing” lottery program only funded 1.5% of that state’s public school budget in 2018.
For decades, state leaders have often been afraid of even touching larger proposals, such as a corporate income tax, a state version of the federal “wealth tax” proposals now espoused by Senators Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont), and eliminating the mining industry’s sweetheart deal that’s tucked into the state constitution. Now that our economy is drastically different from where it was in 1967, there is no one “magic bullet” to save us. We need to think bigger in order to solve these big problems.