Columnist Jon Ralston: State should do homework on tax study

Wednesday, April 12, 2000 | 9:51 a.m.

Jon Ralston, who publishes the Ralston Report, writes a column for the Sun on Sundays and Wednesdays. Ralston can be reached at 870-7997 or by e-mail at ralston@vegas.com

IN ONE of two studies the Nevada State Education Association commissioned to make the case for a net profits tax on business, the most telling line is this: "Given the state's looming structural deficit, its strong dependence on a single industry (i.e gaming) that will face increased competition in the future, and the pressures on all state revenue bases imposed by Internet sales and increasingly mobile businesses, policymakers should use this time to return to many of the issues raised by the 1990 Urban Institute/Price Waterhouse study."

In other words, a decade disappeared, a millennium began and the issues remained immutable since the last tax study confirmed what everyone knew: The state is growing so fast that needs are outstripping a tax structure too dependent on gaming and sales revenues. Gov. Bob Miller and the Gang of 63 took a baby step in 1991 -- passing a gaming-authored business tax that was poorly conceived, rushed through and then revamped the next session. But policymakers failed to take an adult leap into the reality that can be ignored no longer, which is the genesis behind Gov. Kenny Guinn's fiscal forum next month as well as NSEA's initiative.

The teachers union, which seems to make a decennial foray into the business tax business, unfurled its 4 percent profits tax plan this weekend and held a briefing Tuesday in Las Vegas. Although both of the studies the teachers commissioned found exactly what the NSEA wanted them to find -- the tax won't hurt the economy -- each independently had cogent points to make about Nevada's tax structure. One, the Corporation for Enterprise Development, points out that Nevada has the country's "least diversified economy" -- a warning heard 10 years ago, too -- and that the state must improve its educational system.

The other study, by the Institute on Taxation and Economic Policy, calls the state's reliance on gaming and consumption taxes "an addiction at the heart of Nevada's looming fiscal difficulties." The group admires the way the teachers' proposed tax, which would raise an estimated $250 million, is constructed because it would lessen the impact with an exemption for the first $50,000 in profits and would ensure that about half the revenues would come from out-of-state corporations that extract millions of dollars from the state.

Business mouthpieces, not surprisingly, will produce all manner of apocalyptic forecasts. But if the gamers are doing a little Uncle Remus playacting ("please, please don't throw us into the brier patch of a net profits tax"), the chamber types are doing little more than crying wolf. The puny business tax enacted almost 10 years ago also was accompanied by dire predictions. And if the state's low tax structure and the absence of a corporate tax are such a magnet for economic development, why does Nevada remain the country's least diversified economy?

If you want to take the position, as some will, that Nevada doesn't need more money, that growth pays for growth, so be it. Keep your blinders on, don your dunce caps and go to the back of the class.

But what the teachers union, its self-interest aside, is drawing attention to with this tax initiative is the most serious problem Nevada faces. And Guinn knows it, too, and he has a broader view, which is funding all the needs, not just education. But can he inculcate the public and will his pedagogy pay off?

If not, 10 years from now, as you drive down an I-15 that no longer requires widening to visit the Palm Springs Strip, or you pass by the deserted Las Vegas Technology Center, ask yourself why the political elite chose to disregard two decades worth of tax studies and a manifest reality to protect their futures instead of the state's.