Where I Stand — Guy Hobbs: An opportunity lost

Friday, Aug. 15, 2003 | 4:41 a.m.

Editor's note: In August the Where I Stand column is written by guest writers. Today's columnist, Guy Hobbs, was chairman of the Governor's Task Force on Tax Policy. Hobbs is managing partner of the Las Vegas consulting firm Hobbs, Ong & Associates.

ABOUT A YEAR AGO I wrote a column for the Sun that focused on the work of the Governor's Task Force on Tax Policy. As you may recall, this was the body charged by the 2001 Legislature with making recommendations regarding Nevada's fiscal plight. At that time, the task force was still three months away from concluding its work and the Legislature was six months away from tackling the issue of tax policy for our state. We had no idea what would happen at the 2003 legislative session. Now we know.

What did happen? Unfortunately, the trials and tribulations of the session are being viewed as some sort of battle between pro-tax and anti-tax ideologies. This is the way, I'm sure, that those who portrayed themselves as "anti-tax" want the session to be viewed. In reality, however, this is not what happened and, more importantly, this is not what was at stake.

What was at stake was the opportunity to make difficult decisions that would provide for the fiscal stability of the state for years to come. Isn't that what the Legislature intended in 2001 when it unanimously passed Assembly Concurrent Resolution 1, which established the task force? Isn't that what was intended when the Legislature mandated that solutions be fashioned that would deal with the state's long-term fiscal imbalance, the narrowness of the state's tax base and the volatility of revenue that we have historically relied upon?

We believed the answers to these questions to be "yes." However, we now question the resolve on the part of a certain group of our legislators to actually deal with the answers and to take advantage of the opportunity that was before them.

Without question, or credible challenge, it was demonstrated that Nevada was facing a critical shortfall in its ability to sustain services at the levels that the citizens are accustomed to receiving. Our state was faring better than many others, and worse than some others. But the fact that we were facing at least a $700 million shortfall in funding current services could not be denied. While a few myopic attempts were made to distort reality, this baseline premise stands.

The fact that debate ensued with regard to different funding levels above the $700 million mark is of no surprise. What should be remembered, however, is that some of the most "conservative" tax critics at one time or another acknowledged the need to address the baseline shortfall of $700 million. Thus, the argument was not over $700 million or $800 million or $1 billion. It was over the difference between $700 million and other, greater, amounts.

How to fund the shortfall? This is where most of the opportunity was lost.

The final solution included several components that were forwarded by the task force (i.e., cigarette tax, liquor tax, Secretary of State fees, entertainment-related taxes, passive revenue generators). Despite some unfortunate initial mischaracterization of the entertainment tax (and some subsequent problems with crafting the law), most of these sources were not painfully debated and really aren't at issue.

Where science turned into abstract art was the battle over what would constitute a meaningful contribution by business to an effective solution. In the end, the method that was chosen, a tax on payroll, was certainly not the worst outcome imaginable; it was also not the best. And very unfortunately, numerous national and regional companies -- highly profitable companies -- that have farmed Nevada for profits for many years, were once again allowed to walk away relatively unscathed. Small business, which was protected under other proposals, was left in harm's way in the end.

What I am pointing toward is the opportunity to configure a long-term solution, and the opportunity to put certain difficult issues to rest. Instead, notwithstanding the time and unprecedented amount of data that was available, the opportunity was lost and, unfortunately, will have to be revisited in the very near future.

How was the opportunity lost? In part it was lost when time became short and the Legislature became more focused on solving the current, rather than long-term, problem. In part it was lost because certain representatives chose to be politically opportunistic and self-aggrandizing, rather than attending to the best interests of the state. In part it was lost because certain business groups once again put themselves ahead of the broader needs of the citizens of the state. Finally, in part it was lost because some viewed it as a game to play, not as the serious challenge to our future that it was.