Which tax is right for the Silver State?

(Jim Clark) – Tax plan, tax plan.  Who’s got a tax plan for Nevada?  We all know that Gov. Sandoval has a tax plan.  We may have read that the GOP Assembly caucus also has a tax plan and we might have read that Democratic Senator Pat Spearman has a tax plan.  Less well known, because it was just released, is that Nevada Policy Research Institute (NPRI), a free market think tank, also has a tax plan.  Considering Nevada’s revenue and spending needs, which one is right for the Silver State?

Let’s start at the beginning.  Gov. Sandoval’s current budget for the 2013-14 biennium is $6.3 billion plus an additional $580 million in “emergency” taxes which were supposed to “sunset” (end) several years ago.  For various reasons, they have been extended several times but will expire unless extended again.

Must taxes and spending always go up?  No.  Republican governors and legislatures in many states, most recently Wisconsin, having ousted Democrats reduced expenses and increased efficiency turning looming deficits into surpluses.  The main weapon has been reforms to pension and collective bargaining laws for government employees.  Nevada’s GOP caucus with Gov. Sandoval’s support plans a major overhaul in this area, but that’s still a work in progress.

Gov. Sandoval’s tax plan for the biennium would raise $7.3 billion by making the “sunset” taxes permanent and imposing a new business license fee which amounts to a gross receipts tax. The GOP Assembly plan would raise 7.4 billion by increasing payroll taxes, increasing business license fees by a flat sum and extending the “sunset” taxes (but would not impose a gross receipts tax).  Sen. Spearman’s plan would raise $7.3 billion by repealing the business payroll tax, leaving the business license fee unchanged but imposing a tax of 0.47% on gross business receipts.  NPRI’s tax plan would lower taxes by allowing the “sunset” taxes to expire.  They would balance the budget by making Nevada more efficient, primarily by reforming costly public employee union compensation and retirement laws much as have been done in other states.

Now that we are about half-way through the legislative session what is the outlook?  Gov. Sandoval’s gross business receipts tax appears to be in trouble. On March 26 the independent Tax Foundation of Washington, DC issued a well-reasoned report and analysis calling it “economically destructive”, overoptimistic in its revenue estimate, needlessly complex (it’s 130 pages long), producing “absurdly high marginal tax rates” (13 million per cent in the case of one industry) and would likely violate the US Constitution which prohibits discriminatory taxation of interstate commerce.  Moreover from its roll out business leaders and Assembly Republicans have (gently) pointed out the hypocrisy of the Governor opposing the teacher union gross receipts tax proposal (which was defeated soundly last November) and then proposing another version of the same thing.

There has been no detailed analysis of Sen. Spearman’s tax plan but since it proposes a gross receipts tax it is unlikely to even get out of committee in the GOP-controlled legislature.  The Assembly GOP plan does not appear to contain any policy issues or legal problems other than some additional pain for Nevada businesses.  The question is how much revenue does Nevada need to thrive?

NPRI’s ”Freedom Budget” tax plan may provide the answer.  It is presented in great detail, department by department, in easily understandable language (available at www.NPRI.org).  Its main thrust is:  Gov. Sandoval’s proposed tax increase is primarily to effect education reforms.  Some of his proposals have merit others are inefficient but politically popular.  Rather than micromanage education from Carson City just take the top 10% of teachers, treat them with the same respect as medical doctors, pay them like medical doctors and give them the freedom to do their jobs.  Then stand back while they fix Nevada’s education system.

Jim Clark is President of Republican Advocates. He has served on the Washoe County and Nevada GOP Central Committees. He can be reached at tahoesbjc@aol.com.