Montandon: Scrap the Caps

GOP gubernatorial candidate Mike Montandon is making his views on Nevada property tax reform known-- and so far they all seem quite sensible.

As reported by the North Lake Tahoe Bonanza, Montandon thinks:
(1) it's absurd that Nevada remains the only state that values real property for tax purposes based on depreciated value (which depends primarily on how old your house is) rather than market value;
(2) the "tax caps" enacted a few years ago, which restrict the amount by which a property's tax liability can increase each year to 3 percent for residential properties, were (and remain) a bad idea;
(3) property needs to be valued in a systematic and professional manner. (Right now, as is becoming increasingly clear, different localities are using different standards of valuation.)

Caveats: I'm paraphrasing, and things #1 and things #3 shouldn't be that controversial anyway.
But saying thing #1 amounts to repudiating the big property tax cuts enacted in 1981, and that takes some guts-- even if it's obviously correct.

It's to be expected, maybe, that a guy coming from a local government background (he was mayor of North Las Vegas) will have a critical stance toward state-imposed constraints on local taxing authority, but still. Bottom line is that Montandon is saying precisely the things that ought to be said about Nevada's past, and hopeful future, property tax changes.

Special Session Postponed to Friday

In the wake of news that Nevada's projected budget deficit will be larger than previously estimated, Governor Jim Gibbons has postponed the start of his special legislative session on the budget deficit from next Monday to Friday. The news isn't good:

[T]he new shortfall figure lawmakers must deal with when they convene on Friday is $250 million, more than a $243 million shortfall projected by state Budget Director Andrew Clinger. And far above the $94 million projected by legislative fiscal analysts.

A Gibbons representative made it clear that with the expanded deficit, all policy options were on the table-- except for half of them:

Josh Hicks, general counsel to Gibbons, said every type of potential budget cut is on the table for the session, from 4 percent cost-of-living raises set to take effect July 1 for state employees and public teachers, to cuts to programs. Tax increases, he said, "are not on the governor's table."

Which reminds me of this exchange from the John Belushi-Dan Ackroyd classic "The Blues Brothers":

Elwood: What kind of music do you usually have here?
Claire: Oh, we got both kinds. We got country and western.

State Treasury: Special Session Not Necessary

In an interesting development, the Nevada State Treasurer has announced she doesn't think the upcoming special legislative session is necessary:

State Treasurer Kate Marshall joined fellow Democrats Thursday in saying that Gov. Jim Gibbons' proposed special session of the Nevada Legislature is unnecessary.
She sent letters Wednesday to Gibbons and other state leaders,
informing them the state will have enough money in the bank, more than $200 million, to deal with cash flow issues until the Legislature starts opens its 2009 session in February.
Marshall urged Gibbons and other state leaders to meet and go though the general fund budget to see what could be cut. It would be a far less expensive than convening a special session that costs taxpayers about $300,000 a week, said Marshall, of Reno.

Representatives for the Governor's office argue that Marshall is basing her rosy assessment on inaccurately low estimates of the state's likely budget deficit:

Marshall's assessment is out of date because she based her projections on a $60 million shortfall, Gibbons press secretary Ben Kieckhefer said.
This week, state officials said the amount of the shortfall will rise. Legislative fiscal experts put the shortfall at about $100 million, while some lawmakers said Gibbons' experts are saying the shortfall is about $260 million.

There is one sense in which Marshall's position is probably correct: a special session ostensibly devoted to restoring Nevada's fiscal footing is unlikely to be all that productive when a "no new taxes" governor has the last word. If state lawmakers are to honestly take steps to ensure the future of the state's tax system, all options should be on the table.

Tax Hikes on Agenda for Special Session?

The Reno Gazette Journal reports that tax increases may be on the agenda for next week's special session of the Nevada legislature. Among the candidates, according to Assemblywoman Sheila Leslie, D-Reno, is raising the business payroll tax and hiking the hotel tax, popularly known as the "room tax."

This isn't terribly exciting news because the harsh political realities of the state suggest it doesn't matter what tax hikes the legislature discusses:

Gov. Jim Gibbons has said he would stick to his election-campaign pledge of no new taxes. Democrats are a vote shy of being able to override a veto in the Assembly and are in the minority in the Senate. Lanni’s suggestion to raise the payroll tax from 0.63 percent to 1.23 percent and generate $246 million annually won’t go far in the special session, Senate Majority Leader Bill Raggio, R-Reno, said.“I am aware of it and have also heard from him on that and my indication is that this is not the time to start talking about raising taxes,” Raggio said. “We are in tough times and businesses are hurting and in this special session, it is something that we can’t even consider.”

Of course, depending on the outcome of the ongoing brouhaha over the size of Nevada's budget deficit, Democrats may ultimately find it easier to override a gubernatorial veto. And it's always possible that Governor Gibbons will back away from his pledge and start evaluating the state's fiscal jam in a non-judgmental way.

But don't hold your breath.

Not the Worst Idea In the Room

With a special session on Nevada's budgetary woes impending, there's growing interest in tax-based options for closing the state's projected budget gap. A new poll by the Las Vegas Review-Journal finds that one idea from the cherished tradition of "tax somebody" else scores pretty highly: increasing the sales tax on hotel rooms.

Is this going to be the best answer for permanently solving the state's school funding dilemma? It could be part of it. Hiking the rate from the current 10 percent to 13 percent is estimated to bring in at least $75 million a year, which is something.

The most obvious virtue of this plan is that most of the cost would fall on folks who don't live in Nevada. Tourists (and business visitors) will be the primary payers of this tax hike.

A secondary (and slightly more debatable) virtue is that these out-of-staters are probably not going to be dissuaded from visiting Nevada by a higher hotel tax. 13 percent is high, but not outlandish.

However. At a time when Americans are pinching pennies as much as possible, any tax hike that falls most heavily on low-income families could absolutely make Americans a little less likely to splurge on a trip to Vegas. And make no mistake about it-- a higher hotel tax will be felt most keenly by low- and middle-income travelers. High-rollers won't care, but the regular folks who are Vegas' bread and butter may very well factor this into their travel decisions.

One last consideration: as a new report from the Rockefeller Institute reminds us, Nevada now faces more and more competition from other states for gambling dollars. Anything that makes a Vegas trip more costly to, say, an Illinois farmer, makes them that more likely to just hit that state's riverboat gambling sites instead of traveling to Nevada.

So, it's not the worst idea in the room, and worse ones will almost certainly be discussed in next week's special session-- but it's not a cure-all either.

Tax Amnesty: A Good Move for Nevada?

Here's the latest in Nevada's never-ending search for ways of raising revenue without calling it a tax hike: a "tax amnesty." As the Reno Gazette-Journal explains, it's just what it sounds like: for a bunch of businesses who collectively owe about $69 million in back taxes, the state is prepared to waive prosecution (as well as penalties and interest) for anyone who ponies up now.

A press release from the Governor's office has more:

“Providing a temporary incentive for businesses to balance their ledger with the
state is a proven revenue generator, which is much needed during this difficult
fiscal time,” the Governor said. “All the revenue we collect during this amnesty
minimizes the effect the economic downturn will have on state services.”

So what's wrong with this idea? For starters, it's a short-sighted way of balancing the books. The overdue tax, penalties and interest is a stream of money that will hopefully be paid eventually. But by forgiving penalties and interest, the state is basically saying they need money so bad right now that they're willing to accept partial payment and forgo the remainder. This will help, on the margin, right now, but actually digs the hole deeper in future years.

In addition, from a law-and-order perspective, the state shouldn't have to provide a "temporary incentive" for these companies to pay what they're supposed to pay. Either they can afford to pay their taxes or they can't: and if they can, forgiving penalties and interest hardly seems appropriate.

It's not the dumbest idea in the world. It will certainly raise the state some cash. But it's symptomatic of a larger problem with the state's fiscal policy decision-making: the strategy these guys have chosen for getting through the ongoing fiscal crisis is "whatever it takes to balance the books this year." No thought at all to what's generating the short-term deficits; no thought at all to whether this year's fix will make things better or worse five years down the road.

Put another way, if your solution to every cash shortfall is to look for loose change under your couch cushions, that's a revenue-raising solution that is certainly not going to last you very long.

Ballot Access for Tax Initiatives: How Hard Should It Be?

Since the rise of the "direct democracy" movement in the early 20th century, the use of ballot initiatives and referenda has spread like wildfire around the nation-- for better or for worse. It's prompted questions (although probably not enough) about what sort of policy issues ought to be decided via direct democracy rather than by elected representatives.

And now, in Nevada, it's prompting interesting and vital questions about whether proponents of a ballot initiative should be able to show a baseline level of statewide support for an proposal before it's put on the ballot. What's prompted this debate, as the Las Vegas Review-Journal's Sean Whalley tells us, is a new law that does just that:

The law requires people to gather a set number of signatures in each of Nevada's 17 counties based on the population of each county to qualify a measure for the ballot. In the last election cycle, all the signatures needed could be collected in just one urban county.

The idea behind such a reform is that urban and rural interests in Nevada are likely to diverge radically in a way that might make it easy for urban taxpayers to gang up on rural taxpayers.

Interestingly, Whalley tells us, this isn't the first time Nevada has tried to implement this sort of rule:

The previous requirement for Nevada petitioners was to collect signatures representing 10 percent of those who voted in the previous general election in 13 of 17 counties.
The 9th U.S. Circuit Court of Appeals overturned that requirement, however, saying it violated the constitutional principal of "one man, one vote" by allowing a small number of voters in a sparsely populated county to preempt the wishes of the majority.

Nevada lawmakers have tried to respond to the Court's concerns this time around by applying separate signature requirements for each of the state's counties, and weighting each of the county-specific requirements by the voting population:

The new formula requires signatures to be collected based on 10 percent of Nevadans who voted in the previous general election multiplied by the percentage of a county's share of the statewide population.
To determine the number of signatures required in Clark County, for example, the 10 percent who voted in the 2006 general election totaled 58,627. Multiplied by Clark County's share of the total state population, which is about 69 percent according to the 2000 census, the number of signatures needed in Clark County is 40,364.
Using the same formula for Lincoln County, the 10 percent of the vote in 2006 would be multiplied by .2 percent, the county's share of the state population, making the signature requirement would be 122.

The result is that any ballot initiative must show some baseline level of support in every county around the state.

If this seems anti-democratic, that's because it is--and that's OK by me. Virtually every governmental institution we've got at the federal or state level is designed to take us a step or two away from direct democracy. Remember all that stuff you learned in high school civics about preventing the "tyranny of the majority"? That's a big part of our republican (small R) form of government.

Of course, it's important to have an avenue for regular voters to take their case directly to the people, but it's also important to make sure that any such effort truly has widespread support. And in an age when ballot initiatives have increasingly become a tool of well-heeled corporate interests, this is absolutely a goal for which voters should have some sympathy. Nevada's latest change to its ballot access rules may not put the ballot back in the hands of the people, as the populist advocates of direct democracy envisioned a century ago, but it will very likely prevent the ballot box from being used as a weapon by one county against another. And it helps ensure that the ballot initiatives that ultimately make it into the polling booth each November will be well-thought-out and defensible.