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November 29, 2014

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Nevada’s Groundhog Day? The repeating refrains in tax discussions

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Cathleen Allison / AP

Nevada Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, and Senate Majority Leader Mo Denis, D-Las Vegas, speak at a news conference on Tuesday, Feb. 12, 2013, at the Legislative Building in Carson City. Democratic leaders say they will take an aggressive look at overhauling the state’s tax structure.

State legislators in Carson City have said they’re open to changing the tax code and having real tax discussions early enough in the 120-day legislative session to vet measures and pass them.

“We really are solution-driven this time, and we’re starting early and we’re having real discussions and that’s going to help us get to where we need to,” Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas.

But even as legislative leaders promise things will be different, they risk slipping into a Twilight Zone-esque scenario in which the same veteran cohort of lobbyists watches legions of neophyte legislators debate the same tax reform arguments again and again and again without achieving anything.

Legislators have long championed debate and discussion only to hem and haw about passing an actual tax reform bill. They often punt on a decision and call for a study, and the big tax debate each session starts to take on eerie similarities to past sessions.

“I’m so cynical after so many years of seeing things not getting done,” said Guy Rocha, former Nevada state archivist. “The proof is in the pudding. Nevada is about Band-Aids, bubblegum and baling wire. We fumble and bumble along. I’ve heard this story over and over again.”

Here’s the story: Four new Democratic and Republican leaders in the Assembly and Senate start the legislative session saying they have an unprecedented willingness to openly discuss and respectfully listen to debates about the state’s priorities and how it should best pay for education, health, public safety and other services important to Nevadans.

But while it’s a pretty picture of a promise for prosperity, the seemingly novel approach has all the hallmarks of debates from past legislative sessions.

Here’s a look at five ways long-time legislative observers are starting to feel a bit like Bill Murray in Groundhog Day:

Groundhog scenario 1: Extend sales tax to services

This legislative session, Senate Minority Leader Michael Roberson, R-Henderson, has said he supports discussing a sales tax on services that would broaden the tax base and allow the Legislature to decrease the overall sales tax rate.

He’s reprising an idea that Nevada has discussed for more than 20 years.

“Broadening of a sales tax base, coupled with some reduction of the sales tax rate, is appropriate,” said the 1989 Governor’s Commission to Study the Fiscal Affairs of State and Local Governments in Nevada, which recommended broadening the tax base be the “paramount concern” of the Legislature.

Roberson has said many times that he supports broadening the tax base, but “any kind of tax reform needs to be revenue neutral.” He’s again channeling ghosts of 1989.

“Broaden, on a revenue neutral basis, the general sales tax base to fully include hotels and lodging, food for home consumption, drugs, household fuels and other utilities (including telephone service), service to persons (e.g., dry cleaning, beauty and barber shops) and newspapers,” said the 1988 Price Waterhouse fiscal affairs study.

Groundhog scenario 2: It has to work for Nevada

The state and outside groups have exhaustively studied Nevada’s tax system during the past 30 years, and because the bedrock of the tax structure hasn’t had a major shift since the early 1980s, analyst after analyst has noted similar shortcomings and goals.

Senate Majority Leader Mo Denis, D-Las Vegas, said now’s the time to “fix our failing revenue system that’s been in place for a long time.

“We need to figure out what works for Nevada,” he said.

Again, the 1988 Price Waterhouse study started with some similar advice.

“The single most important theme that frames the next several hundred pages of discussion and analysis of Nevada’s tax and intergovernmental system is that the system reflects the history and character of Nevada’s people,” the study says.

Groundhog scenario 3: Tax structure too narrow

When Roberson says in 2013 that “it makes sense to have a more broad sales tax base,” he’s echoing the same tired notes economists have been singing for years: broaden the tax base.

Nevada has long had a tendency to slough its tax burden onto outsiders and tourists via gaming and sales taxes.

“The sales and use tax and gaming taxes are Nevada’s most prolific revenue-producers,” said a 1967 tax study.

It was true in 1988.

“Although Nevada relies quite heavily on the sales tax as a generator of state and local government revenues, it does so by relying on a relatively narrow tax base,” the Price Waterhouse study said.

A 2002 report also noted the state’s narrow tax base. It too predicted today’s debate about a sales tax on services.

“Significant revenue raising opportunities exist with a further expansion of the sales tax base, as do opportunities to reduce current rates and stabilize the revenue flow,” the report states.

Groundhog scenario 4: Nevada taxes too regressive

Democrats have been concerned about a sales tax on services. The idea has come under fire from progressives who note that the tax will hit poor people who pay for services the hardest.

Again, it’s a refrain from the ‘80s.

“The distribution is clearly regressive,” says the 1988 Price Waterhouse study. “That is, the burden increases as family incomes decrease.... The Nevada System is one that is among the most vertically unfair tax systems in the nation.”

Kirkpatrick took note this past week, hedging her opinions about a sales tax on services.

“We have to look at that,” she said. “But we don’t want to put a regressive tax [on people].”

Students of Nevada’s tax structure thought of a way around that regressivity argument decades ago.

The Price Waterhouse study recommended the state enact a “variable vanishing sales tax credit” or other mechanism to either exempt or provide a credit for sales tax on services levied on families or individuals with annual incomes below a certain threshold.

Groundhog scenario 5: We'll talk about "revenue." Promise.

While Nevada’s tax structure has been studied ad nauseum, Democrats also have long used the same rhetoric in approaching the tax debate. Here’s a side-by-side comparison of quotes from Democratic leaders in the early days of past sessions. See if you can pick who said what:

• Former Speaker Barbara Buckley 2009 or Senate Majority Leader Mo Denis 2013:

"Through open hearings we are going to fundamentally examine every line in the budget. So we can show at the end that Republicans and Democrats, Assembly and Senate agree this is what's essential for the state. We'll basically be stating a case for the state of the state."

If you guessed Buckley 2009, you’d be correct. The confusion may be warranted. Here’s what Denis said last week:

“What we’re trying to do is make the case for why we need to do what we need to do.”

• Former Speaker John Oceguera 2011 or Kirkpatrick 2013:

"We will have a revenue discussion. There will be a discussion on revenue whether there is two-thirds or not. At some point we need to stand up and ask Republicans, 'Is this really the state you want?'”

Again, that’s a quote from 2011. Sounds a bit like what Kirkpatrick said last week:

“It’s important we start having the discussion based on facts and not fiction.... We’ve cut a lot of things. We’ve cut education. We’ve cut mental health services. We’ve cut public safety. We’ve cut highway dollars. So we have to look at where we want to be.”

• And one last one. Former Senate Majority Leader Steven Horsford 2011 or Kirkpatrick 2013:

"I'm not looking to put a Band-Aid on it. Business and the private sector cannot have a tax discussion every two years. It creates too much uncertainty."

Yep. It’s Horsford. Here’s what Kirkpatrick said last week:

“What’s the plan for two years down the road? Folks want stability and right now they don’t have any stability.”

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  1. About once every decade we hire expert consultants to examine Nevada's tax structure and make recommendations that the Legislature and Governors promptly ignore. Instead we scratch around for some way to swipe a few incremental tax bucks from visitors and call it good.

    Are there any signs this minimalist approach won't continue? Not yet!

  2. Unavailable for story picture with Curly and Mo is Larry who is off on special assignment" being wined and dined while counting envelopes stuffed full of money and havin a heck of a good ole time with Nevada's Big Mining Lobbyist's and Governor Sandoval...

  3. Groundhog Scenario #6:

    "This tax is only temporary".

  4. Rate changes are irrational. What we NEED is for sales to go up to enhance revenue. Sure, that's gonna take a reviving economy. That would happen AFTER we eliminate some of the drags to the economy--eliminating various programs, limiting assistance to (once) productive Americans, rooting out abuse and fraud.... If we can get real changes like that, our economy would keep going up even after other areas level off.