Editorial: Fairness key to rebates

Friday, May 13, 2005 | 5:32 a.m.

WEEKEND EDITION

May 14 - 15, 2005

Shortly after Gov. Kenny Guinn announced that he wanted to rebate $300 million to Nevadans -- because of a state government budget surplus -- we expressed our doubts. To begin with, there are many pressing needs that the state still hasn't addressed -- such as adequately funding our schools -- that could be a better use of the surplus. Further, Guinn's plan is an unfair way to distribute a rebate. Since the rebate would be based on the amount someone pays in auto registration fees -- and because these fees are set on the value of a vehicle -- it would primarily favor those who are wealthy. Some motorists with older, less valuable vehicles would receive just $41 under Guinn's plan while people with new, expensive vehicles would receive up to $300 for each one they own. Additionally, if people don't own a car, they would get nothing -- eminently unfair since those who use mass transit or the elderly who don't own a car still pay other state taxes.

State legislators -- both Republicans and Democrats -- have been cool to Guinn's proposal as well, with many suggesting that they would rather spend it by enhancing education or beefing up other programs that have been neglected in years past. But recently Guinn, who pushed through the largest tax increase in Nevada's history in 2003, has said he will veto any state government budget sent to him by the Legislature that doesn't include a rebate.

In response to Guinn, Assembly Democrats have come up with a rebate plan, but it differs markedly from the governor's. Although their plan would rebate $300 million to Nevadans, just as Guinn's vehicle registration plan would, it would give a flat $175 check to every Nevadan 18 and older who has either a driver's license or an identification card from the DMV. Unlike Guinn's plan, the Assembly Democrats' plan has fairness built into it since it would treat everybody the same. And people who don't own a car, yet pay taxes, wouldn't be shut out as long as they have a state identification card.

Assembly Democrats say that their plan, which is aimed at giving money back to people because of high gasoline prices, also has the added benefit of not being treated as income by the Internal Revenue Service and, therefore, can't be effectively reduced by being taxed by the federal government. Guinn's rebate would be treated as taxable income, Assembly Democrats say, although the governor says he believes his plan can be worked out with the IRS without any penalty.

Despite our reservations, it is becoming evident that it is almost certain that some form of rebate is going to happen -- the big question now is in what form. In Guinn's defense, because the state doesn't have an income tax, there really is no perfectly fair way to rebate the money. But Guinn's plan is so inequitable that it should be rejected by the Legislature. The Assembly Democrats' proposal, or one roughly like it, should be where the debate begins on a rebate since it is the one so far that comes closest to meeting a fairness test.