Las Vegas Sun

December 19, 2014

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Money:

Taxing argument

Desperate times call for … open wallets?

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Jerry Miller

Here’s the deal, folks: We need higher taxes. There, I said it. And (gulp) I mean it.

We need them because we can’t budget-cut ($1 billion and counting) our way to fiscal health. Nor can we rely on Casino Inc. to part with much more—gaming revenues already provide half of Nevada’s general-fund budget.

I realize this opinion isn’t going to be well-received. After all, in 2005, the non-gaming business community Swift-Boated a gross-receipts plan that would’ve spread the tax burden throughout other industries; non-gamers reiterated their opposition during a May survey. And even our perennially blundering governor has (so far) avoided reneging on his no-tax-raises pledge.

But what Gov. Gibbons fails to acknowledge is that simple math necessitates action in the form of higher levies. To wit: More people = the need for more money. We need more of it just to maintain current levels of across-the-board mediocrity in areas such as education and social services.

And we should because we can (gulp) afford to—maybe not all of us individually, but as a collective? Absolutely.

Our tax burden is moderate. So says the Washington, D.C.-based Tax Foundation. Thirty-five states have higher state and local income taxes, and 29 states have higher property taxes. So ignore bitching editorial types who think the answer is starving the beast and fear that bureaucrats will fritter away the extra money. The billions in tax hikes passed in the last 10 years—from local bond issues to statewide levies that everyone pays—have neither bankrupted our state nor sent us to the poor house. My guess is most of us didn’t notice the impact of these big-ticket tax hikes.

Passed countywide in 2005, the quarter-cent sales-tax bump (to 7.75 percent) is adding $12.50 to our annual tax bills through 2009. Hardly wallet-crushing. The payoff: 850 new cops. Another proposed quarter-cent bump to fund 850 additional officers comes up for a vote next year. It would tack on $25 each year through 2013. That’s about what most of us put on our Starbucks cards every week.

Remember all the doomsaying about the impact of the $833 million legislative tax increase of 2003? Well, two years later the state experienced double-digit growth in sales taxes. A family of four paid an additional $1,448 in taxes—not an insignificant amount, but not poverty-inducing. On the flip side, the budget surplus was healthy enough for then-Gov. Kenny Guinn to greenlight $300 million in vehicle-tax rebates. Bet Gibbons wishes he could get that money back.

In 1998, Clark County voters approved a $3.5 billion school construction and modernization bond issue, which added 55 cents per $100 of assessed value to property taxes. That’s $577.50 a year in taxes for a $300,000 house. Manageable enough. (The other funding mechanisms in that bond were hotel room and real-estate transfer taxes—funneling five-eights of a percent of the price of a room and 60 cents per $500 for each real-estate transaction.) So when a $7 billion bond issue (with the same assessed value rate) to build 138 schools comes up for vote in November, you’ll support it, right?

Haven’t the tax increases been modest relative to income gains?

Yes, according to Jeremy Aguero, a principal in the Applied Analysis economic firm. “If incomes have increased faster than sales taxes on taxable goods—and they have—then consumers are better off. “

Even with higher-than-average sales taxes (6.5 percent compared to a national median of 5.4 percent) Tax Foundation spokesman Bill Ahern says Nevada is “a star in the tax world,” largely because it’s one of nine states that doesn’t tax wages.

Playing devil’s advocate: If we taxed wages, wouldn’t we be able to reduce the number of bond issues and tax increases because there’d be more money in the kitty?

“Those 41 states that do tax wages deal with the same issues of funding things like education and health care,” Ahern argues. “It’s good for people to keep all their wages and for employers to be able to hire people. It does mean that your sales taxes are higher than average, but it’s a great advertising tool for economic development.”

What about giving municipalities more control of resources? A bill slated to be introduced in the 2009 legislative session would do just that.

Says Ahern: “In states that have extensive local control and wide latitude in levying taxes, those localities are not shy in raising taxes and don’t take into account what’s already being paid at the state level. New York has very high sales taxes. It may be 4 percent at the state level and range from 3 to 5.5 percent at the local level. The combination result is an average of 8 percent. Local control brings it closer to the taxpayer, whose voice is much more likely to be heard, but will likely result in higher taxes overall. And there’s a question about whether local control will improve schools or public education.”

Doesn’t being on the low end of the tax burden mean we can afford to pay more, even if we don’t want to?

“Periodically you have to review taxes to make sure they’re fitting the economy, whether it’s high or low burden,” says Nevada Taxpayers Association President Carole Vilardo. “To say that we don’t have enough money to support services is counterintuitive. We have an obligation to educate children, to our growing elderly population and to overarching expenses that do not offer services or enhance a program such as paying retirement. In 2003, we went from general employee contribution against wages from 18.65 percent to 20.35 percent. It wasn’t a huge percentage increase, but was huge in the amount of dollars used. That’s money that would otherwise be used to provide a service.”

So, in the end, we, the taxpayers, will end up paying?

“Taxpayers always bear the burden,” Vilardo says. “We can put a gross receipts tax in place. To the extent the business can support it, it will. If the expense comes to the point where it impacts the gross margin or profitability, the business will pass that on to the consumer. So we will pay either indirectly or directly. There’s no perfect answer, tax or expenditure formula.”

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