Where I Stand — Mike O’Callaghan: Our lost tax dollars

Thursday, May 15, 2003 | 9:26 a.m.

ALMOST EVERY STATE IN THE UNION is having trouble making financial ends meet their growing needs. Nevada is no exception and the sooner the public and legislators accept the consequences of this problem, the sooner reasonable solutions will be accepted. At this point in time it appears our legislators know there is a problem, but are debating whether to take a full dose of taxing medicine or just fool around with a couple of aspirins as they have done in previous meetings. Now the majority of responsible lawmakers must determine if meeting education and other state needs is more important than returning to Carson City with little opposition at the polls in 2004.

The financial crunch being suffered by a majority of states has produced some benefits. Sacred cows and past tax exemptions granted during good times must be reviewed. Several millions of dollars have been written off during recent legislative sessions and now is the time to reconsider those actions. Has any legislator asked the Legislative Counsel Bureau to review the tax exemptions granted during the rather plush sessions of 1993, '95, '97 and '99? It may be too late to reclaim the excess funds given away to questionable organizations, but it's not too late to reconsider past tax exemptions.

Five years ago two Las Vegas legislators, Assemblyman David Goldwater and Sen. Mike Schneider, saw the threat of tax losses to Internet sales. Their efforts to collect these taxes have been hampered by Congress and by several of their fellow legislators who don't have the foresight of the two Las Vegans.

Three years ago Business Week magazine reported the impact of the loss of taxes to Internet sales. This was repeated in this column as follows:

"To compensate for the loss in tax receipts, which contribute about 40 percent of state revenues, governments may have to raise sales taxes. The burden would fall most heavily on people who don't shop online: The poorest 20 percent of Americans -- those earning less than $25,700 per household -- who already pay about 3.5 percent of their income in sales taxes. By contrast, the top 20 percent earners, who make $75,000 or more, pay just 1.3 percent. The more these upper-income shoppers buy at the virtual mall, the less they'll contribute to the cost of running public schools, hospitals and police departments."

Also, the economists for the National Conference of State Legislatures estimated that Internet sales had deprived states of $1 billion in 1999. They went on to predict that by 2003 these losses could jump up to $14 billion.

Some opponents of taxing Internet sales cry that it's another new tax. Not true, it's merely the fair application of a present tax. Sales taxes are by their very nature a regressive tax, but by taking even more from the people who can least afford them is doubly so.

Sen. Bill Raggio of Reno has asked for a full evaluation of exactly how much Nevada can gain from taxes on Internet sales. A 1999 study by professors William Fox and Donald Bruce point to Nevada as one of the 12 states most seriously punished by a ban on this tax.

In order to lay the groundwork for possible participation in Internet sales taxes and other tax benefits, Goldwater has had the Assembly pass AB514, which provides for the Streamline Sales and Use Tax Agreement. This bill will bring Nevada up to modernizing its sales and use tax collections, exemptions and payments if approved by the voters. It will provide a level playing field for the participating states and will go into "effect when 10 states comprising at least 20 percent of the population of states imposing a sales tax have come into compliance."

It's another step forward in a fair taxation system needed to better meet the needs of states.