Tough choices ahead

Saturday, April 3, 2010 | 2:06 a.m.

For years the Nevada Transportation Department has said the current gas tax won’t provide enough revenue to pay for new roads and maintenance over the long haul. Vehicles get considerably better gas mileage than they once did, so fewer visits to the gas station result in dramatically fewer tax dollars being paid at the pump. The net result is that, by 2016, the state will be staring at a $6 billion shortfall in highway infrastructure funding.

In response, as the Las Vegas Sun’s David McGrath Schwartz detailed last week, state officials are looking at what some believe is a better way to collect money to pay for road repair and construction. Next year the Transportation Department wants to test a device in vehicles that would track them. Drivers would be charged a tax based on distance, routes and even the time of the day they’re traveling. For instance, there might be a higher tax for someone traveling during peak driving times, such as rush hour.

The plan is generating controversy, as groups such as the ACLU argue that it would be an invasion of privacy. It also sounds unfair and counterproductive to penalize Nevadans who have bought fuel-efficient vehicles, only now to be taxed at the same rate as those who drive gas-guzzlers. Furthermore, it’s unclear how out-of-state drivers would be taxed if the state no longer collected at the pump.

Leaving aside some good arguments against such a mileage-metering plan, the real problem rests in that Nevada hasn’t raised the state’s share of the gas tax since the early 1990s. The state’s population has exploded in two decades, putting even more pressure on the state’s infrastructure. If the state’s gas tax had simply been indexed so that it would incrementally increase, then a potentially intrusive program the state is considering likely wouldn’t have even been considered.

Meanwhile, on Tuesday, the same day the Sun reported on the Nevada Transportation Department looking at a different way to collect revenue, the newspaper also ran an interesting story from The New York Times about a growing number of states scrambling to find alternative sources of revenue to fill budget gaps. Specifically, the Times story focused on states looking to impose taxes on services that often aren’t taxed, such as haircuts, entertainment, sporting events, landscaping, accounting and legal services.

Nevada taxes 18 consumer services, according to the Times. In contrast, Washington state taxes 158 consumer services. In Pennsylvania, the sales tax structure creates some oddities. As Pennsylvania Gov. Ed Rendell notes, popcorn you buy in a theater is taxed but candy isn’t.

So Pennsylvania is weighing a plan to increase the number of services taxed while decreasing the overall sales tax rate that consumers pay.

“Look, I’m not a crazy tax guy,” Rendell told the Times, mentioning recent cuts in the state’s budget. “I know what we’ve cut the last two years, and I know how deep and painful the cuts have been. So I know that in the future there’s going to have to be a revenue increase, and this is the best of the alternatives, obviously none of which we’re happy about.”

Like Pennsylvania, Nevada faces a dire situation and has been cutting its budget recently. When taxes are raised here, they tend to be of the Band-Aid variety. Of course, if Nevada’s political leaders had been doing the right thing in the past, modestly passing tax hikes when times were good, we wouldn’t be in the boat we’re now in, desperately hunting for new sources of revenue or taking a cleaver to the state’s budget. One thing that’s clear is that Nevada must come to grips with creating a stable, fair tax structure that works for the 21st century.