‘Temporary’ taxes

Gov. Brian Sandoval last week announced he will seek to extend for two more years some $620 million in “temporary” Nevada taxes — a 0.35 percentage-point increase in the sales tax rate and a near doubling of the payroll tax rate among them.

The payroll tax is particularly harmful to attempts to attract new high-paying jobs to Nevada, because it singles out for increased penalties businesses with skilled, highly paid personnel.

In his 2010 campaign, Mr. Sandoval opposed extending these tax increases, first enacted in 2009, arguing such a step would represent a tax hike, something he opposed. The Republican eventually relented in a deal with legislative Democrats at the end of the 2011 session after the state Supreme Court ruled local revenues couldn’t be diverted to the state general fund, as Gov. Sandoval had proposed.

Thus the taxes are due to expire again, this time in July 2013. But the governor now opposes allowing that to happen, arguing it would jeopardize funding for public schools and social services.

Geoffrey Lawrence, deputy policy director at the Nevada Policy Research Institute, acknowledged that with ObamaCare, “Gov. Sandoval was dealt a bad hand.” ObamaCare, “unless derailed by the U.S. Supreme Court or through the legislative process, will cost the state of Nevada at least an additional $5.4 billion in Medicaid costs by 2023,” Mr. Lawrence added, and “will begin undercutting the state’s ability to finance education and other services” as early as 2014.

But the most important takeaway here is something else Mr. Lawrence noted. While dreaming up new taxes may present logistical as well as political problems for politicians, hiking or extending a “temporary” tax — the levy and its collection mechanism already in place — often presents the path of least resistance.

“This demonstrates, once again, the danger behind the concept of a ‘temporary’ tax increase,” Mr. Lawrence notes. “Once bureaucracy becomes dependent on that additional revenue to sustain itself, the tax increase rarely goes away.”