‘Reshuffling revenue’ or maybe new taxes

“If not now, when?” That’s the question Gov. Brian Sandoval asked recently while speaking of his plans to revamp the way state services are funded, according to the Reno Gazette Journal (Oct. 26, 2014). The question must not be viewed as simply rhetorical but should dictate the agenda of the 2015 Nevada legislative session.

The governor was coy when asked if he meant new taxes, responding “You’ll find out.” He did say, however, “The revenue streams in this state are changing and we have to have revenue streams that match the new economy we have.” He’s expected to reveal his proposals in his State of the State address on January 15.

In the same RGJ article, some Democrats are reported as being concerned Sandoval’s reforms are going to just reshuffle how revenue is allocated and is not going to add any new money to Nevada’s tax structure. However, Mr. Sandoval offered some reason for hope in a Dec. 8 press release following a meeting of the Interim Finance Committee, in which he stated “we must continue to look beyond our traditional revenue sources, which are not recovering at the same pace as the rest of our economy….” Although still somewhat ambivalent, this statement seems to suggest new taxes.

The temporary $1.2 billion tax increases that have been extended twice and are going to sunset again in June, together with the reported agency requests of $1.14 billion more than the current budget, validate the need for serious fiscal action. The answer lies in a combination of fair and equitable permanent tax increases and operational savings, not simply drastic reductions in funding essential programs.

According to a 2011 U.S. Census Bureau report, Nevada’s state revenue per capita of $3,848 was the second lowest of all states, and state spending per capita of $4,848 was the fourth-lowest. This “low taxes-low public funding” tradition reflects an anti-government mentality that does not serve Nevada well.

Among the greatest needs in Nevada are increased funding of public education, an essential component of education reform in this state. New school construction and improvement of existing facilities, fully-funded public kindergarten, reduced class size, adoption of new technologies and equalization of school district funding all require new and dependable sources of revenue.

The anticipated Tesla gigafactory has brought a new awareness that a skilled workforce is critical. It can only be developed through expanded education programs and curricula. Without such a labor supply, Nevada will not reap the full benefits of its blossoming economic development program.

But it’s not only new revenue sources that are needed; reforming Nevada’s tax structure is also essential. In a state that’s so antagonistic to the federal government, it’s ironic, and revealing 44 percent of Nevada’s 2013 revenue came from Washington. The next largest source is the tax on gaming, a relatively declining industry in Nevada, followed closely by regressive sales and excise taxes that hit lower income consumers the hardest. (Nevada Controller’s 2013 Report). Without a state income tax, corporations and individuals get a virtual free ride.

Effective Nevada governance is severely hampered by constitutional provisions prohibiting any form of income tax and requiring a two-thirds legislative majority to increase taxes. Overcoming those legal obstacles is a difficult, time-consuming task. But as Mr. Sandoval asked, “If not now, when?” It’s time to begin that process.

Bo Statham is a retired lawyer, congressional aid and businessman. He lives in Gardnerville and can be reached at bostatham@me.com.