Closing the Door on Public Tax Hearings?

Sunshine is the best disinfectant. But the Nevada Tax Commission appears to think some maladies should be allowed to fester in the dark. That's the take the Review-Journal's Erin Neff has on the news that pending legislation would allow businesses to request a closed hearing on tax appeals.

The bill would still require the Commission to take a public vote at the end of these private hearings, but Neff fears (rightly) that the meaning of the vote would likely be difficult for the public to interpret in the absence of basic facts about the content of the hearing:

[S]imply permitting the commission to vote in public may not necessarily give the public more information. It seems the commission could easily use codes that would make it difficult for the public to understand their actions.Nevada's tax code has nothing on the federal mess, but it still has enough numbers representing different classifications of businesses to send even the most knowledgeable followers of tax policy scrambling for the key.

The rationale given for pulling the shades down on Nevada tax appeals is the same old story we've heard before:

The commission said closed hearings were necessary to protect trade secrets or proprietary information from getting into the hands of competitors.

But Neff has exactly the right response:

Has the agency never seen a Securities and Exchange Commission filing? Everything from a company's taxpayer identification number to every parcel of land it owns and all capital and ongoing expenses seem to be readily available to the public.

For more background on this issue, check out this long report from the Center on Budget and Policy Priorities on the broad topic of corporate tax disclosure. For Nevada-specific information, check out ITEP's policy brief on this topic.

Nevada: A Model for Property Tax Reform?

The Miami Herald's Lisa Arthur thinks she's found the solution to Florida's property tax woes: just do what Nevada did back in 2005. To hear Arthur tell it, Nevada eliminated pretty much every property tax inequity one could think of:

• Issue: Homeowners were about to be taxed out of their houses.
• Solution: Tax bill annual increases were capped at the lesser of 3 percent or the rate of inflation -- no matter how high a home's value climbs.
• Issue: Commercial property owners would shoulder an unfair tax burden without a cap. And as values on their properties and their taxes rose, they would pass the cost to renters.
• Solution: Tax bill increases were capped at 8 percent annually for commercial property, including rental property. If a landlord could prove rents are at or below the fair market value set by the federal government, they get the 3 percent cap.
• Issue: Snowbirds with second homes would get slammed unfairly if they didn't get the same tax breaks as full-time residents.
• Solution: As long as they don't own another home in Nevada, out-of-staters with second homes get the same 3 percent cap as full-time residents. If they rent the home part of the year, the cap goes to 8 percent. If the rent meets the affordability definition, they get the 3 percent cap.
• Issue: Newcomers to the state and first-time home buyers who bought into a hot market with escalating home prices would get hit with much higher tax bills than longtime homeowners in the same neighborhood.
• Solution: In Nevada, the tax break stays with the property. The new home buyer inherits the seller's tax bill no matter how high the value of the property has climbed or what it sells for.

Put this way, Arthur's got a point. Pretty much every property owner in Nevada has protection against large tax hikes (where "large" means more than 3 percent a year). But Arthur is setting the bar pretty low for a successful property tax reform. Her benchmark appears to be that there's a mechanism restricting the growth of everyone's property taxes to something resembling the growth rate of inflation. Such an oversimplified benchmark overlooks two equally compelling (actually, even MORE compelling) objectives of property tax reform:
1) preserving adequate revenues. Capping everyone's property tax growth at 3 percent will make taxpayers happy, but only until they notice their schools don't have new textbooks anymore.
2) targeting property tax breaks to those who need them. Arthur recognizes the universal refrain of people "being taxed out of their homes," and clearly thinks preventing this is a good goal, but says nothing about the fact that simply capping the growth of everyone's property taxes is a remarkably blunt instrument for achieving this goal. If you're a fixed-income Nevada homeowner whose property taxes were unaffordable before 2005, the 2005 reforms don't help you.

Arthur is right in one important respect: if you cap everyone's property taxes, inequities in property taxes between different property owners will be less noticeable, and complaints about higher property taxes will likely diminish. But the part of the story she misses is that this goal comes with a price: a tax system that is more inadequate over the long run, and one that is even more divorced from ability-to-pay considerations than property taxes normally are.

Transportation Funding: Will Counties Be Left Holding the Bag?

The Reno Gazette-Journal's Jerry Purdy makes the case for a county-level gas tax hike of 5 cents to help resolve Reno's transportation funding woes. The heart of the case? The federal and state lawmakers who should be coming up with transportation funding solutions have simply fallen down on the job-- which means that Reno can either pay its own way to better roads, or watch their transportation grid collapse into rubble.
This is yet another example of the real "trickle-down" theory being practiced by elected officials at the federal and state levels these days: Congress passes the buck on important spending needs to the state level, where lawmakers dodge the bullet yet again by paring back aid to local governments. But locals don't have the same luxury: they either have to hike taxes or stop providing essential services. Purdy's right: it shouldn't have to come to this, but it seems increasingly likely that local tax hikes will be the only way out of Nevada's transportation mess.