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April 20, 2014

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jon ralston:

If only there were time to debate the Democratic tax ideas

I know the Democratic tax plan has about much chance of passage as Shelley Berkley hosting a soiree to honor Byron Georgiou.

I know Democrats may have been thinking more about optics and the base (such a noble failure!) than political reality when they presented a multifaceted, farsighted way to broaden the tax base and restore $1.5 billion to the budget.

I know Republicans are in automaton mode at this point, regurgitating the programming Gov. Brian Sandoval installed or the Democrats inadvertently inserted.

And I know there is not enough time to fully vet the most dramatic, substantive restructuring of the state’s tax system in history — and we haven’t even seen the actual legislation yet.

But let’s talk about it anyhow. Allow me to deconstruct:

• Don’t let the sun go down on them: Most observers think the only component of the plan with any chance is the continuation of sales and business taxes scheduled to sunset June 30. This is seen as easier to spin because it’s not a tax increase if you continue existing taxes. I think this is actually the worst part of the plan and the easiest to criticize. First, it is a tax increase — $600 million worth — when a tax that is not supposed to exist on July 1 … exists on July 1. Second, the very taxes the Democrats want to keep alive, sales and payroll taxes, are the same ones they argue are inimical to the state’s long-term fiscal health — at least the way they are constituted now. And, third, I know one Legislature can’t bind another but: Lawmakers two years ago, by putting on the sunsets, pledged to their constituents they would raise those taxes only for two years. This would be a broken promise.

• A franchise player: The so-called margins tax, modeled after a tax of the same name that metamorphosed in Texas from a franchise tax, is accepted by many people as a much fairer way to tax business than the current system. It exempts most small businesses — the hold harmless level is proposed at $1 million in annual revenue but that clearly is negotiable. And it allows businesses to choose one of three ways to calculate the tax to reduce the burden: Deducting either the cost of goods, overall compensation or 70 percent of revenues from gross before applying a tax estimated at 1 percent. This is broad and fair. But there is one argument conservatives will raise. Even if this tax makes sense, it is the proverbial nose under the tent, and once a tax is embedded in law, politicians can lower the exemption level when they want more money. This just occurred in Texas with a proposal to change the threshold and rope in 28,000 more businesses.

• Selling the transaction: The idea to tax services makes sense to a lot of business folks — especially those who wouldn’t come under the tax, which would have a rate of 1 to 4 percent. The idea to broaden the state’s narrow sales tax base and then, eventually, lower the overall rate has been embraced by the left and the right, including the Nevada Policy Research Institute.

• Don’t modify, repeal: Getting rid of the modified business tax, which is a head tax, would ensure that in a few years, most small businesses would have a tax cut. Historical irony: The payroll tax was proposed in 2003 by business groups, including the Las Vegas Chamber of Commerce, which sold out its small members to ensure its larger companies didn’t have to pay a gross receipts tax.

The table is set for a real policy debate, but too many people won’t pull up chairs, and it’s too late to digest all the permutations and problems. So we will get what we always do: truncated discussion, frenetic arm-twisting, tortured spinning and rank pusillanimity.

So the session will either climax in an extended train wreck with Democrats holding out futile hope to garner GOP votes or there will be a White Flag Ending, with legislative leaders handing Sandoval what they hope is Pyrrhic victory as the consequences of his budget are felt in the fall and the public demands action (hello, ballot questions). Of course, the governor believes the economy will rebound enough so the state — and his political fortunes — will be fine.

Sir Walter Raleigh would have understood how sad this is: missing the chance for a historic debate on the tax structure and spending priorities. But the Democrats frittered away the time by being too clever and too arrogant, precluding any real debate, and the Republicans have decided to be rubber stamps instead of legislators, believing saying “no” is the path to electoral salvation.

Ah, what might have been.

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  1. Ah what might have been. Well, more irresponsible spending is what might have been.

    Democrats want to restore the same level of spending we had during the housing bubble. We literally had a spending bubble. The Democrats plan is completely irresponsible.

    http://www.thewesternwrangler.com/2011/0...

  2. There is only one equitable and stable tax and nobody wants to go there. A tax paid directly by the people of a set amount and this would get rid of all other taxes. This merely places the tax in control of the people now paying the taxes. Of course the people don't want to pay taxes, that is why democrats come up with even more inventive ways to tax people by jingling the change out of their pockets. Now they want us to hand over our wallets, like a highwayman they seek "justice and fairness" for their supporters and tell everyone else to go tot hell.

  3. Excellent column. After discussing inanities for 90 days, they reveal to us their real intents for the 30 remaining days in "Reconstructing Nevada for the 21st Century". Its subtitle is "Nevada currently has the largest state General Fund Budget Deficit in the nation". And who might be responsible for creating BOTH the need for "reconstructing" Nevada AND the largest deficit in the nation? Could it have been those who voted for the irresponsible 30% budget increase in 2003? This is what the 7 graphs that follow illustrate--or maybe these people don't know how to read graphs. The main causes of economic "destruction" are excessive spending and deficits that are "cured" by more taxation and spending. The slippery slope is made exponentially steeper.

    Passage of this budget is nothing more than an attempt to continue that level of irresponsibility. This document should be titled "De-constructing Nevada for the 21st and 22nd Centuries", subtitled "Nevada public sector continues to squeeze blood from a far more devastated private sector". The subtle reference on page 32 to the "potential to increase property taxes in Southern Nevada as property values continue to fall" exemplifies the levels of their disdain and criminal intent. Translation: "First we impoverish the private sector (2003), make them pay the gold-plated compensation of thousands of new employees (2004-2010), pile on debt for public pension losses (2008) and mandated programs (2009-2011), and then demand that the people, who have lost 30-100% of their salaries and properties, pay higher taxes on less income and lower property values--so that public sector reductions can be held at 5% and we have a better chance of being re-elected" (but we won't talk about that)".

    This is a recipe for total economic collapse. Ed Uehling

  4. Great analysis, Mr. Uehling!

    It leaves the big question: is it time to hitch up the team to the wagon loaded with our worldly belongings, and head East or West for greener pastures?

    Has this problem with reforming the tax structure been a result of the brevity that the Nevada State Legislature meets? This action should have been done over 30 years ago.

    Maybe, it is time to change the laws to increase the amount of time for the Nevada State Legislature to meet. With the increased time, they could appropriately research, debate, and address the needs of the people and state, and truly provide the service they were elected to do.

  5. Let's take an objective look at our situation: about 13.5 % measurable unemployment (probably 18%); one out of seven houses in Las Vegas now sitting vacant (caused by the crash, the result of fraudulent scams perpetrated by criminal mortgage banks that pumped up a housing bubble to collect enormous fees); and a tax system in Nevada that's like a manic-depressive illness: maniacal to spend a surplus of revenue during boom times and depressed to the brink of suicide during recessions and the current economic crisis. Our economy is sick, barely starting to recover. Any new shock might send it spinning into another psychotic break. Our state has gone insane.

    Is there a doctor in the house?

    Public sector spending is among the lowest of any state in the nation in proportion to its population, including on education. Still: the depressed among us wish to slash our own wrists in a glee-fest of self-blame and self-loathing, hearing the voice of the governor in their heads telling them to do it; the maniac among us wish to dance on the tabletops with tax proposals that don't stand a chance of passage right now, then plot revenge if they don't get their way. Neither extreme is balanced; neither extreme is healthy.

    Is there a doctor in the house?

    Our state's political system is ready for a lock-up ward. The means of dealing with this illness is an ideological stalemate in our legislature: a political system in a straight-jacket, Carson City acting as crazy these days as any loony bin, its governor like a catatonic narcissist repeating the same pat phrase "no new taxes" over and over into a mirror while the great concerned family of Nevada goes on suffering. Our state is gravely disabled.

    Is there a doctor in the house?

    Almost all outside consultants and business leaders agree: Nevada needs a much more rational, more stable tax base in order to grow into the new century. The Democratic tax proposal should be a starting point for analysis; and the Republicans need cognitive therapy to find a compromise solution. Sandoval's proposal to cut taxes even further during the greatest revenue shortfall in Nevada history is flat out crazy: a plan that will cost at least 3,000 jobs and so dismantle and destroy public services, human resources, and public education infrastructure that our state will be set back twenty years! And all continue dancing around the ward in foam rubber slippers pretending to be stars.

    Reason is blocked. Babble continues. Can our legislature ever learn to talk reason and sense, ever, ever work toward a sane solution?

    Is there a doctor in the house?

  6. 1. The Constitution does say that the regular session must end at 1AM (midnight, standard time) 120 days after it begins. However...
    A. Many governments and organizations have verbiage such as, "Non-calendar days are days when an employee does not work and does not receive compensation." The passage of such a definition would extend the regular session -- since all non-work days would be treated as non-calendar days, and the legislature is entitled to "120 calendar days" in the session.
    B. The legislature could refuse to fund anything beyond what has already been funded, forcing the governor to call a special session. The state Constitution does NOT say that the governor sets the agenda for a special session; it states only that the governor "convenes" the session. In fact, the word "agenda" does not appear in the Constitution.

    I'm sure there are other ideas for gaining the time to do a good job on the budget.

  7. The Democrats Tax Plan summed up...

    If you can't dazzle them with brilliance, baffle them with Bulls%#T.

    Ram it through without notice and criticize Republicans for not going along. Same tact Obama and Reid uses.