Desert Companion

Analysis: Saw, meet money tree

The culmination of years of effort, the 2015 tax package is being targeted for repeal — with some obvious short-term and surprising long-term consequences

Money TreeTo start, it’s important to understand that the tax bill passed by the 2015 Nevada Legislature wasn’t just the product of a few months of work. The groundwork that led to the unique confluence of events in Carson City this year began more than 12 years ago, when another popular Republican governor in his second term failed to pass a gross receipts tax to better fund Nevada’s public schools. Where the late former Gov. Kenny Guinn failed, the seemingly charmed Gov. Brian Sandoval succeeded.

But it wasn’t easy. In the years since 2003, several proposals for taxes were discussed and some even fashioned into bills, although none were seriously considered by the Legislature after the failure of Guinn’s tax. Nevada’s response to the recession required reductions in education spending that made the issue more acute.

Before the 48 members of the Legislature who approved the tax bill pushed their green buttons in May, literally thousands of hours were spent dissecting nearly every alternative. Hearings stretched until long past sundown. Numbers guru Jeremy Aguero of Applied Analysis estimates he and his staff spent 1,100 person-hours weighing 117 different tax models, and then distilling the results for lawmakers. “It’s massive,” he said of the effort.

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Sandoval and his team monitored the Legislature daily, responding both to policy and political questions. Initial plans were changed. Anti-tax business lobbyists were heard from, loudly and repeatedly. Alternatives were weighed and rejected. The payroll tax? Hardly any businesses in Nevada actually pay it, evidence showed. A sales tax on services? Talks broke down over which services should be taxed and at what rate.

Finally, thanks to Sandoval’s resolve, good research and solid lobbying, a consensus began to coalesce around Nevada’s new commerce tax, along with a package of other increases. Skeptics were slowly persuaded, a constitutionally required two-thirds supermajority was painstakingly assembled and tough votes were finally taken.

Now, all that may be undone.

Or, maybe even worse, frozen into the law until a vote of the people comes along to change it.

At least two factions of conservatives have maneuvered to challenge the new taxes using the state’s referendum laws, by which citizens can ask for a ratifying vote for any bill or resolution passed by the Nevada Legislature.

One faction, led by activist Chuck Muth, is seeking to repeal the entire tax bill, from the commerce tax to increases in the cigarette tax, business license fees and DMV registration fees, among others. Another faction, led by state Controller Ron Knecht, Las Vegas Councilman Bob Beers and former Assemblyman Ed Goedhart, plans to target only the commerce tax. Because turnout in the 2014 election was so low — and because referendum signature requirements are based on turnout — only 55,233 valid signatures are required to put a referendum on the ballot.

But here’s the thing: Simply getting the question qualified for the ballot is a victory for anti-tax conservatives. If voters say yes, the tax (or taxes, depending on which version makes the ballot) is repealed. The immediate impact of that would be a hole in the budget, likely followed by a special session and serious trimming by lawmakers.

But if voters say no, Nevada law says the law cannot be changed without a subsequent vote of the people. So even though a hated tax would essentially be cemented into the law books, conservatives can take cheer in the fact that it can never be raised without another vote of the people. The long-term impact of that outcome could pose much greater problems for state budget planners — and Nevada businesses — in the future than even an outright repeal. As Muth explained in a recent email newsletter: “So a qualified referendum on the largest tax hike in Nevada history is a no-lose scenario for Nevada’s taxpayers and businesses. You see, even if the tax hikes aren’t repealed, the Legislature won’t be able to raise them on their own again in the future.”

So why create all the chaos in the first place? It’s not just the basic conservative philosophy that government is bad, and that cutting taxes is the only way to contain its size and scope. It’s also the idea that lawmakers who voted for taxes defied the will of the people, who in November 2014 overwhelmingly rejected The Education Initiative, a 2 percent margins tax on business revenue.

Conservatives argued in Carson City — and still argue — that the taxes are similar.

“So taxpayers are supposed to suck it up and accept a billion-dollar tax hike because 48 bought-and-paid-for legislators and the governor think they know better than 429,324 voters (who voted down The Education Initiative in November)? I don’t think so,” Muth scoffed in another piece. (Aguero has said the two taxes are dissimilar “in almost every meaningful way,” from the rate charged to the revenue raised to the way different businesses are treated under the tax.)

Finally, whether by design or not, there’s something even more insidious than the instant impact of tax repeal at play here. It’s an idea that never-say-die conservatives want to take hold in the minds of lawmakers, especially Republican lawmakers, which reinforces the ultimate futility of working to raise taxes in the first place.

Why go to all the trouble of working on a tax increase — the research, the long hearings, the lobbying of colleagues and persuading of constituents, finding at least 28 Assembly members and 14 senators — when you know all your work will come to naught? Why face the inevitable bad publicity, the potential of a recall election (they can be launched against state lawmakers just days after a legislative session begins), the potential of a hard primary election, when you know activists will just work to put the entire tax before voters anyway? Why spend the time studying the research, hearing the arguments and attending the hearings when the real decision will be made months later and miles from Carson City by a harried voter dropping by the grocery store, or the Costco, or the DMV, where petitions are being circulated. What’s the point of the most well-argued speech on the floor of the Assembly, when “taxes are really bad and hurt business” is just as likely to snag a signature from a voter who lacks any knowledge of the history of an issue or the consequences of repeal?

It’s that idea — that a forever war will be waged against anybody who violates anti-tax orthodoxy — that’s perhaps the most subtle outworking of the referendum movement.

So it’s important to remember that the referendums against the taxes of 2015 aren’t just targeting the work of a single legislative session. They’re targeting the unlikely success of a perfect storm of circumstances, and trying to squelch the chances of such a storm ever brewing again. 

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