Recession may be over, but we’re still in ‘new normal’

Should we call them Mayors Against the Tax Cap?

Speaking at the Review-Journal’s Hashtags &Headlines luncheon Monday, the mayors of three Southern Nevada cities told my colleague Glenn Cook that they’d prefer to see the cap on property taxes lifted, allowing their governments to collect more money from the public.

For those who don’t remember, the caps were put in place by the 2005 Legislature to counter fast-rising property values that sparked big tax bills for Southern Nevada homeowners. The Legislature mandated that property tax bills may rise no more than 3 percent for residential properties, and 8 percent for commercial property, each year.

Then the recession hit, and everybody switched from worrying about paying the tax bill to paying the mortgage. Local governments and school districts saw revenues decline, and belt-tightening began.

Now, with Nevada in a slow-but-steady recovery, local governments are seeing revenues grow more slowly because of the caps. And they want the Legislature to do something about it. “It is not looking for additional resources, it is trying to get back to where we were,” said Henderson Mayor Andy Hafen.

Of course, local governments asking the Legislature for taxes is like Scrooge’s kid asking for a raise in his allowance. In the 2013 session alone, state lawmakers dodged a business tax initiative (sending it to the 2014 ballot); ignored a bill on another business tax; and passed the buck to local governments in Clark and Washoe counties on three other tax-related questions. They OK’d a push to remove the constitutional cap on the net proceeds of minerals tax, but voters will have the final say on that next year. About the only tax the Legislature felt comfortable voting on was an extension of expiring tax rates that Gov. Brian Sandoval had already built into his budget.

So, good luck with that, mayors. Assembly Speaker Marilyn Kirkpatrick — who pushed for a doomed admissions tax in 2013 that would have taxed gym memberships and movie-theater tickets, among other things — has already expressed reluctance to adjust the property tax cap. “What happens when housing prices rise again sharply?” Kirkpatrick asked, according to the Review-Journal’s Ben Spillman. “You can’t keep taking it out and putting it back in.”

Heck, even California has a property tax cap! Proposition 13 has been capping taxes in the Golden State since 1978.

The fact is, Nevada’s property tax cap has rested on a thin foundation since it was passed. According to Nevada’s Constitution (Article 10, Section 1), “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation.” There’s a real legal question as to whether the “split roll” of 3 percent for residential property and 8 percent for commercial property comports with the Constitution. But since no one has challenged the scheme in court, it has survived as bona fide state policy to this day and probably will going forward.

There’s no question Nevada’s local governments and school districts have seen less revenue because of the tax cap, and have been hindered in their ability to provide the services we need and reply upon. But there’s also no denying that there were legitimate policy reasons for state lawmakers to impose the tax caps in the first place. While the overheated, investor-driven housing market of the mid-2000s hasn’t returned, it may someday. And the regular people caught in that rapid expansion could easily find themselves there again.

It’s understandable Southern Nevada’s mayors and school trustees want to — what’s the phrase? — “get back to where we were.” Surely, there are thousands of Southern Nevada homeowners who would like to get back to homes that weren’t underwater and an even chance of making a profit if they sold. But the fact is, we’re not there.

It was vogue in the early days of the recovery from the recession to say we needed to accommodate ourselves to the new normal. That hasn’t changed: We’re in a fundamentally different place than we were in 2005. We may get back to where we were someday, but that day is not this, and we all need to realize it.

Steve Sebelius is a Las Vegas Review-Journal political columnist and author of the blog SlashPolitics.com. Follow him on Twitter (@SteveSebelius) or reach him at 702-387-5276 or ssebelius@reviewjournal.com.