Sunday, March 09, 2003

Back in the saddle

Greetings, all. Time to resume some policy-related posting. We're both recovering somewhat from the accident -- I must say the 10-degree-above-normal, upper 70s days sure do a lot to pick up your spirits. Lola's back to moderate sun-worshipping, which can't hurt.

Anyway, since we last met, Kenny Guinn's tax-Nevada-into-oblivion strategy has fallen flat. On Tuesday, his budget director Perry Comeaux (with or without cardigan?) told lawmakers the state is expected to end up the fiscal year with a $71 million reserve and $36 million in the "rainy day" fund ... unless we go to war with Iraq. Then, all bets are off. Just to be safe, the Legislature must pass Guinn's $74 million package of "temporary" tax increases to get the state through the fiscal year.

Few were fooled by this lame attempt at brinksmanship. After hearing three hours of testimony from business leaders, stating how a tripling of the state's per-employee Business Activity Tax would lead to massive layoffs, the tax committee chairmen of both houses (one Republican, one Democrat) said Comeaux's testimony reinforced the notion that an immediate tax increase is probably unnecessary and would certainly harm the local economy. (Assembly Majority Leader Barbara Buckley also pointed out that most of the new taxes would only be used to replenish the rainy-day fund anyway.) Indeed, the committee chairs said the tax bills may never get to the floor of either house, since neither committee is likely ot pass it.

To be sure, state Democrats are downright giddy that they can present themselves as the voice of fiscal sanity and portray Guinn and top Senate Republicans (who are themselves in the pockets of the bureaucracy) as wacky, tax-and-spenders. But such posturing matters little, so long as taxes aren't raised. Then, on Friday came word from Carson City lobbyists (who really run the show there, anyway) that the hated gross-receipts tax may be doomed as well.

The upshot of all this -- if lawmakers don't go wobbly? Most of the sin taxes in Guinn's package will pass. The BAT will likely be doubled, and the sales tax extended to cover services. Overall, the pro-tax crowd will get roughly half the taxes they want. But the new levies won't take effect until summer, and by then the economy may have rebounded. Most importantly, the GRT will be dead. (The last time Nevada lawmakers raised taxes, in 1991, also during a recession and in the shadow of war with Iraq, the ultimate outcome was a populist revolt and a constituional amendment which requires a two-thirds majority of both legislative houses before taxes can be increased.)

A tax hike, even of this magnitude, would not be the optimal outcome, of course. Carson City departments, the teachers union and the public employee groups will still escape any measure of accountability, as this editorial suggests; but it's a damn sight better than what seemed certain a few weeks ago.

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