Significant overhaul of Nevada’s tax system is still a fantasy

Was I ever wrong. The expensive 1988 Price Waterhouse tax study suggesting a general business tax would help stabilize our taxes became a useful doorstop, but no major tax restructuring followed.

Although there have been some tax tweaks along the way, some 24 years later, a significant overhaul of Nevada’s tax system is still just a fantasy. Countless special interest exemptions remain tucked into the tax laws, and there could be more before this session ends. Nevada still employs a system in which some major enterprises don’t pay a business tax in Nevada, but do in other states.

The late GOP Gov. Kenny Guinn proposed a broad-based business tax in 2003, but his plan failed. Instead, although taxes were raised by a generous $836 million, it was more a mish-mash than a thoughtful solution.

Fast forward and another Democratic Assembly speaker, Barbara Buckley of Las Vegas, vowed that in 2009 the system that relies heavily on gaming and sales tax would be overhauled. I was less gullible then, which is good, since the tax system did not improve. A recession turned out to be a bad time for major tax changes; it was more a time for treading water, so as not to drown in debt.

When Assemblyman John Oceguera and state Senate Majority Leader Steven Horsford, both Democrats, promised a tax overhaul in the 2011 session, I yawned. They didn’t have enough votes in their respective houses to pass a tax change, so their talk was nothing more than blather.

The Nevada State Education Association is so fed up with the Legislature’s history of patching taxes together that the union likely will try to raise taxes for education through an initiative.

Yet as much as I support the idea of a more stable tax base for Nevada and eliminating many special interest exemptions, creating tax policy through initiatives is a terrible idea.

This isn’t the teachers union’s first cha-cha with tax initiatives.

In 1990, the union collected enough signatures to qualify a 10 percent corporate income tax for the ballot. It failed after the association withdrew its support and instead backed Gov. Bob Miller’s business activity tax. That was a mistake because that tax was watered down so that it covered a hole in the budget, but didn’t do much to enhance education.

The teachers union also attempted an initiative to raise Nevada gaming taxes from 6.75 percent to 9.75 percent on big operations. That initiative never made it to the 2008 ballot because the Nevada Supreme Court ruled it didn’t meet the legal standard of having one subject only.

The one-subject limitation shows why, even if the association launches an initiative, it can’t create tax policy.

Tax reforms require a comprehensive proposal that would be discussed at length by everyone concerned, where unintended consequences can be pinpointed and resolved with some semblance of thoughtfulness. Nevada’s taxes need to be viewed in totality, not in fragments.

Gov. Brian Sandoval hinted on “Face to Face with Jon Ralston” that he might be interested in considering changing the system, not to raise more taxes, but to create a more stable tax structure. But his language sounded like a maybe, not a promise.

It’s more likely Sandoval would wait until he’s re-elected to attempt any substantive changes.

His re-election campaign is certain to tout his proud achievement: Eliminating the modified business tax on businesses with payrolls less than $250,000. That saves more than 115,000 businesses a total of $60.9 million over the next two years and eliminates a tax on 70 percent of Nevada’s businesses.

Look to see that vote-getter on a Sandoval mailer in 2014.

Jane Ann Morrison’s column appears Monday, Thursday and Saturday. Email her at Jane@reviewjournal.com or call (702) 383-0275. She also blogs at lvrj.com/blogs/morrison.