A Walk Down Tax Memory Lane

(Jim Clark) – Over the past 20 years or so, Nevada has tinkered with various tax schemes and increase proposals that have left a checkered trail.  I will be the first to admit that some Republican officials have been just as guilty as Democrats in advocating an increase in existing tax rates and imposing new taxing ideas.

Perhaps the most interesting was the effort led by GOP Governor Kenny Guinn during his second term to impose a business gross receipts tax at the behest of the gaming industry.  Gamers are already taxed on their gross receipts, and they wanted all other Nevada businesses to share their misery.  The legislative effort to accomplish this was Herculean and resulted in a majority of Republicans in the Assembly uniting to deprive the governor, Democrats and Senate Republicans of their planned gross receipts tax, although in the end, increases in some existing taxes were enacted. 

The immediate result was that tax revenues were vastly higher than outlays.  Democratic legislators offered plans to spend the surplus, but Gov. Guinn insisted on a rebate to taxpayers.  After much debate, it was determined that most Nevadans paid auto registration fees, so all car owners received a lump sum rebate.

When Republican Governor Jim Gibbons was elected, the Democrats took control of the state senate and increased their lead in the assembly such that by turning a few GOP senators they could muster the 2/3 vote necessary to increase taxes once again, which of course they did.  State Senator Bill Raggio agreed to deliver enough senate Republican votes to pass the proposal, but he insisted on the tax increases “sunsetting” after two years, a development that brings us to the present.

Republican Governor Brian Sandoval came to office with a different approach.  He believes that the way to increase tax revenues is not to further increase rates or impose new taxes; rather, to attract new businesses and their employees to Nevada to broaden the Silver State’s economic base.  Last week, with a small army of student protestors squatting on the capitol grounds, Gov. Sandoval went among them distributing coffee and doughnuts, listening to their complaints and patiently explaining his vision of an economically healthy Nevada.

Late in the current legislative term, Democratic solons have introduced their new taxation ideas.  These include a business margin tax, a broadened sales tax and elimination of the sunset provision for the 2009 tax increases.  They have no GOP support for these proposals whatsoever and haven’t the votes to pass any tax increases. 

Perhaps the most pernicious Democratic proposal is the business margin tax, another form of gross receipts tax, which is imposed whether or not a business makes a profit.  The Tax Foundation, a national non-profit tax education organization, completed its 2011 study of comparative state business tax burdens and has concluded that Nevada currently ranks first in the nation for its desirable business tax climate.  Neighboring states, which are ripe targets from which to conscript businesses to move to Nevada, all fare worse.  The closest is Utah, ranked sixth.  Idaho, Arizona, California and Oregon are ranked 17^th, 22^nd, 33^rd and 45^th respectively. 

The study goes on to show Nevada’s business climate ranking would drop to 32^nd if the Democrats enact a California-type corporate income tax, 39^th with a gross receipts tax and 45^th with a Margin tax. 

With all the anguish, protests, predictions of doom and other attention-getting activities of folks whose state subsidies are being curtailed, it’s hard to see the big picture; however, slowly and surely businesses are beginning to relocate to Nevada.

If Governor Sandoval could be relieved of doughnut duty, maybe he could set about prospecting for more business relocations to Nevada.

(Jim Clark is President of Republican Advocates, a vice chair of the Washoe County GOP and a member of the Nevada GOP Central Committee.)