Editorial: Bill would rob Peter to pay Paul

Thursday, March 20, 2003 | 8:53 a.m.

Senate Majority Leader Bill Raggio says people ask him all the time why the state is in such financial difficulty when it is leading the country in growth. His answer is that the state is virtually cut off from one of the main revenue sources that growth provides -- the property tax. More than 20 years ago the state agreed to permanently receive just a small percentage of property taxes and depend heavily on sales taxes. Particularly after Sept. 11, sales tax collections have been well short of projections, helping to create the state's shortfall of more than $700 million.

The Legislature is now considering an array of new and increased taxes, many of which are unpopular and their fate is uncertain. Into this mix Raggio, a Reno Republican, has introduced Senate Bill 308, which would not impose any new tax or increase any existing tax. Instead, it would enable the state to share in revenue increases now enjoyed almost exclusively by cities and counties. As the population increases, more properties are bought. This results in more property tax being collected each year even though the tax itself has remained stable. Currently, this increase in revenue stays with local governments to help pay for the growth.

Raggio's bill, however, would make the state a partner in collecting revenue from this growth-driven source beginning in 2005. A full half of the annual increase, after allowing for inflation and a few exemptions, including the portion of property tax dedicated to public schools, would shift to the state. The revenue projection is substantial, beginning with $67 million in 2005 and escalating to nearly $300 million by 2013. Raggio says local governments should tighten their belts and start sharing, because the state needs this money to help finance services that are now strained by growth, such as mental health, prisons, long-term care and assistance to needy families.

The problem, however, is that local governments need these increases for their own needs, such as health care and fire, police and social services, which also are not keeping pace with growth. We agree with the Governor's Task Force on Tax Policy, which discussed what Raggio is proposing but dismissed it, saying, "... (this approach) would shift, as opposed to solve, the problem." What's needed by the state, clearly, are new and higher taxes that will enable its essential services to be provided without running up deficits. Shifting money from local governments would add no new money, solve only a fraction of the state's problem, and force cities and counties to further cut services or raise taxes.