‘Stabilizing’ the tax base

The buzzword du jour among the Democratic majority in Nevada's Legislature is "stability." The state wouldn't have such a dramatic budget shortfall -- $1.2 billion in spending has been offset already, with an additional $250 million in cuts to come -- if the government's revenue structure weren't so volatile, they argue.

With some major fixes, the electorate has been assured, Nevada can have soothing predictability in tax collections, a flow of money that doesn't nosedive when the economy does. Such revenue "stability" can end Nevada's "boom-bust cycle," Assembly Speaker Barbara Buckley, D-Las Vegas, has said throughout the 2008 campaign and in town hall meetings on the state's budget crisis.

The findings of a Las Vegas Chamber of Commerce study released Friday run counter to that argument. According to the report, Nevada has the ninth most stable tax structure in the nation. The study also determined that the state's per-capita tax collections rank 27th nationally.

"The results of this analysis suggest that Nevada's state tax system does not sit at either end of the spectrum," the report said. "It is neither among the nation's most stable systems, nor is it among its most volatile."

In fact, the report points out, the state's business-friendly tax structure, which levies no personal or corporate income taxes and no estate tax, has served Nevada remarkably well over the past few decades. Over a 20-year period ending last year, the state had the country's top population growth rate and top job creation rate, as well as the nation's fastest-growing state government budget.

"The reality is that every state's tax system is a function of consumption, productivity and/or wealth," the report states. "When the economy suffers broadly, as is the case in the vast majority of states today, there is no tax system in the nation that is immune to its effects."

Indeed, no state is facing deeper budget challenges than neighboring California. The Golden State has most every tax imaginable, yet Gov. Arnold Schwarzenegger this week proposed raising the state sales tax 11/2 cents, creating new taxes on alcoholic drinks and oil extraction, taxing services such as vehicle repairs and veterinary services and sports and amusement park tickets, as well as boosting vehicle registration taxes. And he still has to cut the state budget by billions of dollars on top of that. Is this the kind of "stability" Nevada wants?

Those unhappy with Nevada's tax structure imply that residents can afford to pay more taxes because so much of the state's revenue comes from gaming levies and sales taxes paid by tourists. But such reasoning acknowledges that -- in normal economic conditions -- the state has plenty of money. Taking Nevada's budget even higher means giving it farther to fall.

When the Legislature convenes in February, lawmakers would be wise to keep handy the Chamber of Commerce's study, along with a study commissioned by the Nevada Development Authority, which found that adding new taxes to the current mix won't have much effect on the stability of the state's tax system.

The 2009 session's focus on "stability" mustn't morph into a movement for destructive tax increases.

When the economy recovers, the state government's bottom line will bounce back, too.