By:  Doug Busselman, Executive Vice President

The joint session of the Assembly and Senate Tax Committees on Thursday (March 5th) heard about the weakness of the Nevada tax system to fairly extract money from the private sector in order to provide for the spending requirements of state government.  This news account from the Reno Gazette Journal reports the details of some of those who came before the legislative committees to urge expanding the state’s tax system in order to more fairly acquire from those who supposedly “have” so that lawmakers can authorize ever-increasing levels of spending.

It was interesting to listen to the arguments made by the pro-tax’em crowd of the Progressive Leadership Alliance of Nevada (PLAN), the National Education Association and organized labor.  The heads of the mining association and the gaming association told of their current levels of contributions and willingness to participate in working with the legislators in figuring out how everybody else could pay up too.

We’re back to 2003 and the idea of coming up with a wide-scale general business tax, although this time around it seems more centered on taxing profits than taking off the top (gross receipts).

No legislator has indicated specifics of what might be on their back-room drawing boards, but a number of the members on the Assembly Tax committee seemed to be really friendly to a general business tax idea of some kind.

The most defined tax proposal, by PLAN advocates significant increases to the state’s mining tax, getting rid of most of the deductions they now get to subtract from their operations before forking over the taxes on the minerals being taken from the ground.  Their version for a “general business tax” takes the form of a 5 percent net profits tax applied to businesses (including mining, gaming, retail and construction) with profits from $50,000 to $100,000 and a 7 percent net profits tax for those with profits of $100,000 or more would raise an estimated $194 million for Nevada’s general fund. 

Another idea from PLAN deals with the Modified Business Tax.  Currently this tax rate is 0.63 percent and PLAN is proposing to double this tax to 1.26 percent. They report that this would raise an additional $279 million per year and would be a way to quickly and efficiently increase our state revenues.

Although not on any center stage, discussion platform, the point has been made that taxes not being charged for services might be worthy of examination.  Somewhere around 1983 the amount of money spent on goods and the amount of consumer spending on services crossed paths and services started exceeding goods.  Current estimates (at least according to the charts that were handed out) note that current spending on services is pegged at 59.7 percent of the amount of the totals spent by consumers in Nevada and goods are at 40.3 percent.  The gap between the two also is trending to continue.

Given the fact that goods are taxed, by application of the sales tax, and services are not – the take home message is that we’re taxing the wrong thing.  Perhaps it would be better to consider that the likely approach would be to work at finding a way to tax services and keep taxing goods too.

One of the persons who came to the witness table bravely raised the question “when will there ever be enough?” referring to how much will it take before legislators believe tax revenue is sufficient.

One legislator responded that because people keep moving to Nevada the need for more spending continues to increase.

Something about that answer identifies the real problem of Nevada’s tax system as well as the thinking concentrated in the legislative building.

If it’s government’s role to take from those who have “Nevada Business” in order to give those who legislators want to receive “individual citizens” – when will it become a better idea to stop being a business and get over on the other side of the formula?