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NevadaLabor White Paper on Nevada Regressive Taxation |
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FROM
THE OFFICIAL RECORD OF GOV. GUINN'S TAX STUDY TASK FORCE
(Submitted
by a Nevada union business representative.)
February 4, 2002
Guy Hobbs, Chairman
Governor's Task Force on Tax Policy in Nevada
c/o Legislative Counsel Bureau
401 S. Carson St.
Carson City, NV 89701-4747
Dear Mr. Hobbs:
Per your memo dated 9 January 2002, here are my comments as to where your
task force should concentrate its efforts in reviewing Nevada tax policy.
I take the governor and the task force at their collective word that all taxes
are on the table.
1. REDUCE REGRESSIVE TAXATION.
A. As you are
well aware, the sales tax is the most regressive tax, as its percentage of
extraction varies inversely with an individual's disposable income. The Nevada
Dept. of Taxation annually compiles a long list of tax exemptions. Those which
benefit the most people should be kept, such as the sales tax exemption on
groceries. Exemptions which benefit the few, such as the Steve Wynn-lobbied
high-priced art tax breaks and the 2001 sales and use tax break for professional
auto racing teams should be reviewed for elimination.
B. The current
method of taxation under which large businesses may apply for property tax
reductions not readily available to the individual homeowner must be reviewed
and equalized for fairness.
2. MAKE PROPERTY TAXATION FAIR
A. UTILITY TAXATION.
Review the rather arcane laws passed in the 1999 legislative session which
changed utility taxation. Experts tell us that these laws will exacerbate
the movement of the tax burden onto residences and away from big business.
Public utilities pay a lot of property tax. Because of two seemingly innocuous
bills passed in 1999, utilities will, over time, avoid a lot of taxation,
forcing counties to make up the lost revenue by increasing taxes on other
property owners.
B. THE BACK DOOR
INCOME TAX. Please review the efficiency of tax increment districts which
are administered by municipalities in the name of redevelopment. By redlining
the most expensive property in a community and earmarking the incremental
ad valorem tax increases to be spent within the redline area, cities and counties
are forced to raise taxes on property owners outside the redlined areas to
make up the difference.
Taxpayer subsidies
help create new jobs. But the costs (e.g., roads, parks, schools, police and
fire protection) of all those new people don't get covered if property taxes
generated by the new businesses stay downtown to subsidize more development.
Homeowners and renters live in dwellings commensurate with their incomes.
Property taxes are levied on the value of those residences. The presence of
tax increment districts thus acts as a backdoor income tax, forcing non-redline
property owners to subsidize the tax loss of, e.g., downtown redevelopment
agencies.
| RECOMMENDATION: Review the efficiency of all entities enjoying earmarked tax revenue. They often evolve into "earmarked empires" which jealously guard their monetary turf. Regional transportation commissions, airport and convention authorities and redevelopment agencies act like sovereign nations without accountability to the taxpayers. |
3. REVIEW AND MAKE GAMING TAXATION FAIR
A.
INCREASE THE GROSS GAMING TAX, currently the world's lowest. There is substantial
evidence on the record that the gambling industry is not paying its fair share.
Please see the Nevada Commission of Economic Development's 1999 study which
points at low wage gambling industry jobs as creating the need for more government
services and, ipso facto, increased taxes.
The study may
be obtained from the commission and is posted at http://www.nevadalabor.com/cop/ncedstudy.html
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B. REDUCE OTHER TAX
SUBSIDIES TO THE GAMING INDUSTRY IF POLITICAL PRESSURE CONTINUES TO MAKE A
GROSS GAMING TAX INCREASE IMPOSSIBLE.
About one-third
of the revenue generated by the gross gaming tax is returned to the industry
in the form of corporate welfare subsidies such as downtown redevelopment
agencies, convention and visitors authorities, specialized tax abatements
such as the fine art subsidy, the lucky bucks casino coupon deduction and
a host of others. These tax abatements should be reviewed and reduced or eliminated.
In the alternative,
more of the money generated, e.g., by room taxes funding convention authorities,
should be redirected to local purposes and away from paying for advertising
and marketing which the private sector should handle on its own. This redirection
will further reduce the pressure on governments for new tax revenue. It will
also conform to the spirit of the original 1955 state law establishing fair
and recreation boards.
Not long before
his death, former Reno city councilmember and longtime Reno-Sparks Chamber
of Commerce Executive Director Jud Allen wrote in the Reno Gazette-Journal
that the tax funding for the current Reno-Sparks Convention Center was sold
to the taxpayers in 1960 as a way to pay for local parks and recreation. He
noted that the true intent was always to fund gambling industry promotion.
4. REDUCE CORPORATE WELFARE SUBSIDIES.
Economic diversification is a laudable goal. However, the tax breaks available
in the process need review and revision. The recent granting about $2 million
in tax breaks for Starbucks' new Douglas County roasting plant provides an
excellent example. The Starbucks case illustrates
how both the tax break and open meeting laws need amendment.
I attended the
14 November 2001 Starbucks hearing along with some of my fellow union members.
We had some serious questions about Starbucks wages at its proposed new facility.
Lt. Gov. Lorraine
Hunt would not allow us to speak to the issue, insisting instead that we reserve
our comment for the end of the hearing, long after the Starbucks vote. The
open meeting law needs changing to allow public input so that future tax fiascoes
will not occur without public input.
While we weren't
allowed to speak, Lyon County Commissioner and NCED member Leroy Goodman raised
many of the points we wanted to make. He noted that most of the 88 initial
Starbucks jobs will pay well below the $15.09 per hour threshold required
for state tax breaks. When a few executives and supervisors were removed from
the calculation, the employees would average only $12.60 an hour, with some
making as little as $9.53. He pointedly criticized the wisdom of a plant employing
only 88 people and paying a personnel manager over $100,000 a year.
The whole purpose
of the tax break legislation was to create good-paying jobs, not creative
accounting. Ironically, the gap between Starbucks managers and workers is
so wide that the state tax break could actually dampen hiring. The new plant
is supposed to employ 200 when fully functional. But hiring too many new lower-paid
workers could bring down the average and blow the tax break. So hiring could
actually be diminished because of the public subsidy. THIS
REVERSE INCENTIVE MUST BE ELIMINATED.
Goodman
took a risk reading pay rates into the public record. Starbucks invoked complete
secrecy under state law. We were denied almost all information by state officials.
Most of the information we were allowed was faxed a day before the hearing.
Former Nevada
Gov. Mike O'Callaghan (D, 1971-1979) termed the Starbucks abatements "overboard
with generosity" and called for a legislative review of companies which
have received such subsidies. In a recent column in his Henderson/Boulder
City News, O'Callaghan wrote "Providian Financial Corp. announced it
was closing its call center in Henderson. This action puts about 700 people
out of work. This is the same company that the Nevada Economic Development
Commission awarded a $116,000 grant to help train 300 employees," O'Callaghan
stated.
"I suggest
that the Nevada State Legislature call for a study of all the past tax breaks
and grant recipients and determine how many are still here, the number of
company employees each retains and the salary and benefits now in effect.
This information should then be compared to the promises made when seeking
state grants and tax breaks," O'Callaghan wrote.
On Nov. 14, 2001,
one member of the commission asked for a similar review during the Starbucks
hearing. We have asked for a copy of that report when it is prepared and suggest
that your task force obtain a copy.
|
RECOMMENDATIONS 4A.
Legislatively require a more equitable distribution of wages at companies
such as Starbucks which ask for job creation tax breaks. |
5. OBTAIN EXPANDED FEDERAL PAYMENTS IN LIEU
OF TAXES. This modest program was initiated to compensate Nevada for the tax
loss of having 87% of her land off the tax rolls and in the hands of the federal
government. Not much has been heard about this revenue source in recent years.
It should be reviewed and expanded.
Please take these comments as constructive and let me know how I may be of
further service.
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