Another fiscal crisis, another tax study

By David McGrath Schwartz

Sunday, Aug. 30, 2009 | 2 a.m.

You can buy a study, but you can’t buy a backbone.

Nevada has a nice archive of august analyses of its tax structure, explaining what is wrong and how it could be fixed. With lawmakers’ vote last week seeking consultants to write yet another, at an estimated cost of $500,000, the library will get a bit larger.

But then what, skeptics wonder. Will lawmakers depart from the pattern of the past and find the political will to implement the recommended changes, political consequences be damned?

A 2002 study was followed by a fight over a proposed gross receipts tax on business. Lawmakers passed what was then the largest tax increase in state history, but failed to substantially change Nevada’s reliance on sales and gaming taxes, which critics say are unstable and as a result make the dips in revenue more severe during recessions.

The studies that preceded that one resulted in even less action.

“I have a hard time believing a new study will find the problems — reliance on gaming and sales tax, both proving to be problematic at this point — are any different,” said Guy Hobbs, managing director of Hobbs, Ong and Associates, a Las Vegas financial advisory firm, who led the governor’s task force on taxation in 2002. “I’ll be intrigued to watch what they do with the report.”

The latest study has been pushed by Senate Majority Leader Steven Horsford and Senate Minority Leader Bill Raggio, the former a Las Vegas Democrat, the latter the longtime Reno Republican leader.

Although they are cooperating so far, they are ultimately working toward very different ends. Both appear to be looking for a study that would justify their policy goals.

Raggio has said for more than two years that the state needs an unbiased analysis of the state’s tax structure and how money is divided between local and state governments. Reading between the lines (and based on conversations with Republican sources), it appears he and some other legislators want to shift more property tax revenue from local governments to the state in 2011.

Raggio said Horsford’s original legislation calling for the tax study seemed directed at justifying a new business tax. “It has to be an objective study that is not predestined and used as a horse to ride in a tax increase,” Raggio said.

Horsford, however, thinks the state needs a broad-based business tax. Nevada is one of only a few states without a personal or business income tax. He denies he wants the state to have a higher tax burden or raise more money, saying it should just be raised differently.

Horsford proposed a corporate income tax during the session, but quickly found there was no support from fellow legislators. Horsford, Raggio and Assembly Speaker Barbara Buckley said there wasn’t time to reform the state’s tax structure during the session — dealing with a historic budget hole and an often-absent governor was work enough.

With them starting now on the agenda for the 2011 Legislature, that excuse is gone.