Editorial: The one question to ask every candidate

The major party primaries are over and it is on to the General Election this November. The candidates will be making the rounds shaking hands and asking for your vote.

So, stick out your right hand and firmly clutch you wallet with your left, then ask where this candidate stands on the question of whether to alter the current property tax law.

Back in 2005, when property values across the nation and especially in Nevada were skyrocketing, Nevada lawmakers passed a law capping the annual increase in residential property tax bills at 3 percent and business property tax hikes at 8 percent. (The fact the Nevada Constitution states that all “property belonging to corporations now existing or hereafter created shall be subject to taxation, the same as property of individuals …” is a topic for another day.)

The law also created two other caps based on two economic measures — the 10-year average percentage of change in assessed values of homes and the average percentage of increase in the previous year’s Consumer Price Index multiplied by two. The higher of those two figures became the cap so long as it was less than 3 percent.

When the housing bubble burst and property values plummeted the law had the perverse effect of allowing some property tax bills to continue to increase even though the property values were on the decline. But values are on the upswing again.

In the 2017 Legislature a bill was introduced to basically change the property tax caps from ceilings to floors. The bill’s digest stated flatly, “This bill revises the formula for calculating the partial abatement so that the annual cap on increases of the property taxes on certain single-family residences and residential rental property cannot be less than 3 percent.”

The bill, backed by a majority of Democrats, eventually died because it could not garner the requisite two-thirds majority required for a tax increase under the Constitutional amendment successfully ushered in by former Gov. Jim Gibbons.

You see, with inflation currently in check and the 10-year average of property values now including the years of slumping values, the property tax caps in urban counties have been well below 3 percent.

According to the Nevada Department of Taxation, for Fiscal Year 2016-2017 the residential tax cap in Carson City, Clark, Douglas, Lyon, Nye and Washoe counties was 0.2 percent. Still an increase but one that left the local governments crying poverty. The caps in Elko, Esmeralda, Eureka, Humboldt, Lander, Lincoln, Mineral and Pershing counties were 3 percent, with the rest lying somewhere in between — 1.9 percent in Churchill, 2.9 percent in Storey and 1.5 percent in White Pine.

But it is not like Nevada has low property taxes. According to Tax-Rate.org, in 2018 Nevada ranks 24th in the nation in order of the average amount of property taxes collected and 28th in property taxes as a percentage of median income.

According to Zillow, Nevada home values have gone up 15.4 percent in the past year and predicts they will rise 6.7 percent within the next year. This is what has the property tax cap change proponents salivating.

If those seeking to remove the current caps have their way, property taxes could easily double or triple in a matter of years.

So, be sure to ask the candidates with extended hands whether they are really reaching for your wallet.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

Newspaper column: Study calls for simple and fair taxation

The word that will be buzzing through the halls of the Nevada Legislature like a swarm of bees from February until June will be “taxes” — whether to raise them, create new ones or fix the ones we have.

Our lawmakers would do well to heed the advice in a study by the Tax Foundation titled “Simplifying Nevada’s Taxes: A Framework for the Future.”

Commissioned by the Las Vegas Metro Chamber of Commerce, the 80-page report remains neutral on just how much tax revenue the state needs but rather concentrates on reforming the tax system so that it will ensure Nevada is economically competitive and fair.

“Nevada should consider fixing what is broken with the current tax system instead of pursuing a brand new tax to layer on top of the narrowly based, complex existing taxes,” the Tax Foundation suggests. “A number of elements of the tax system exist only in Nevada, and those in particular should be scrutinized. Changes should address state revenue volatility, be fair, and reduce carve-outs that plague the system.”

In a criticism that should be no surprise to most Nevadans, the study found the state relies too heavily on volatile tourism taxes and in general the tax structure is narrow, complex and inequitable. Its base should be broadened and rates lowered.

Though a number of Nevada’s panoply of taxes — from insurance taxes to car rental fees to real property transfer taxes — come in for criticism, the two that deserve the closest scrutiny are the ones that pick the pockets of every Nevadan — sales and property, which combined generate more than 65 percent of state and local tax revenue.

One of the main problems with Nevada’s sales tax system is that it has failed to fairly reflect Americans’ changing spending habits over the decades. While in the post-World War II era our personal consumer spending was about 60 percent on goods and 40 percent on services, today’s spending ratio is reversed with only about 35 percent going for goods and the rest on services — which Nevada mostly does not tax.

The study suggests that taxing services would be more equitable and stable and allow the overall statewide average sales tax rate of nearly 8 percent to be lowered. But since the sales tax is regressive — taking a bigger percentage bite out of the incomes of poorer families — some services should be exempted, such as medical and hospital care, just as food and medicine are exempt now.

In addition, the study suggests simply repealing the state’s Live Entertainment Tax, which has a labyrinth of exemptions and exclusions that make it expensive and nearly impossible to enforce, and applying the sales tax to such events. For example, some of Nevada’s biggest events are specifically and questionably exempted from the Live Entertainment Tax — Burning Man, minor league baseball, the Electric Daisy Carnival and NASCAR’s Nextel Cup series.

As for property taxes, the Tax Foundation found Nevada’s system to be unique in the nation. No other state assesses property values for tax purposes the way Nevada does.

“Unique features include a depreciation factor and a ‘ratchet’ effect in the property tax cap that has presented challenges for local governments,” the report says. “Although the concerns that prompted these features remain valid, the resulting system is cumbersome, convoluted, and unstable, especially in the wake of a recession.”

The “ratchet” referred to is the law that was enacted during the state’s boom years when property values were escalating exponentially every year. To curb the impact, lawmakers capped the annual increase in property taxes at 3 percent for residences and 8 percent for commercial property. Since prices fell during the recession, state and local governments are lagging in revenue recovery due to the caps.

But the biggest difference in Nevada is that the tax is based on replacement value rather than market value. In addition, Nevada is unique in applying a depreciation factor on property even though property seldom actually depreciates. The 1.5 percent annual depreciation for up to 50 years means a person living in a newer house than a neighbor with an older house of the same value may be paying considerably more in taxes.

The Tax Foundation’s analysis should be closely studied by our lawmakers, not as a way to increase taxes, but as a means of achieving fairness, stability and predictability.

In his State of the State speech Gov. Brian Sandoval ignored everything the study recommended and made some unequal taxes even more unequal.

 A version of this column can be found online at The Ely Times, Mesquite Local News and the Elko Daily Free Press.