Where I Stand — Guest columnist Guy Hobbs: Assessing tax reform

Tuesday, Aug. 13, 2002 | 8:53 a.m.

Editor's note: In August the Where I Stand column is written by guest writers. Today's columnist is Guy Hobbs, the chairman of the Governor's Task Force on Tax Policy.

THE CURRENT REVIEW of the state's tax structure is well under way and has produced an unprecedented amount of data and dialogue.

Why is this task being undertaken? Aside from the fact that it was legislatively mandated, concerns have been expressed by the governor and other elected leaders that revenues may soon not be sufficient to support services. Further, certain groups claim that Nevada's spending in areas such as K-12 education and long-term care are already deficient when compared to other states.

In essence, there is a concern that there may not be enough revenue to sustain services at current levels coupled with a belief, on the part of certain groups, that more money needs to be spent on new or expanded services. These two forces place a significant strain on Nevada's fiscal wherewithal.

Beyond the need for additional funding, there are those who argue that the tax structure, as it currently exists, is neither well balanced nor fair. In short, attention to the fiscal health of the state is long overdue.

The Governor's Task Force on Tax Policy did not blindly accept the assumption that Nevada has fiscal problems because, frankly, the way a problem is viewed is oftentimes in the eye of the beholder. Further, the way that a problem is portrayed is oftentimes a product of a particular group's desire to focus attention on its own wants or needs.

So, how do you assess the problem in such a way that you are focusing more upon fact and less upon emotion? Is the problem real, or is it a product of campaigns by interest groups to make us believe that there is a problem?

To assess the problem, the task force has created an extremely detailed model of the state's budget. Bottom line, the model tells us that if we make no changes to our current system, future revenues will be insufficient to support current service levels. This point is worth reiterating.

If we are going to be able to afford the services we currently have, we will need more revenue. How big is the problem? In rough terms, we will need up to $200 million, annually, in additional revenue over the next biennium to maintain current service levels. By the end of this decade, that number may climb to $650 million per year.

If we desire to have service levels beyond what is currently provided, even more revenue will be needed. The Legislature, not the task force, will be the venue in which levels of services and funding are determined.

Of course, raising revenue is not the only way to balance this equation; services can also be trimmed to match available revenues. Since our state Constitution requires a balanced budget, we cannot spend beyond the resources that are available.

In effect, the services that can be provided are constrained by the availability of resources. If resources are deteriorating, then services will deteriorate.

Since it is well established that a problem exists, what should be done to correct the problem? This is the part of the task force's mandate that is currently being discussed and formulated.

Broadly speaking, the task force must provide the governor and the Legislature with a clear statement of the problem. This, we believe, has been accomplished.

Next, we must provide our policymakers with the tools necessary to address the problem, including those that will maintain existing services and those that will support an enhancement of services.

To accomplish this, the task force will be focusing upon several possible sources of revenue. Those sources that have received the greatest attention to date include expansion of the sales tax base, increases in certain excise taxes (i.e., cigarette and liquor taxes), improving the efficiency of current tax collections, increasing taxes on property, implementing a state lottery program, and imposing some form of increased tax upon all businesses.

It would be premature at this time to presume the outcome of this process, but logic suggests that it will include a blend of several of the foregoing sources.

It would be an understatement to say that constructing a final set of solutions, and refining the details, will be a complex and painstaking process. It would also be a mistake to believe that this process ends with the submission of the task force's recommendations.

Given the dynamic nature of our state and economy, it is a process that must continue to evolve well past legislatively imposed deadlines. If this type of process is not continued, we will be destined to be reactive -- which we cannot afford to be.