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Home > News > Legislators criticize extension of sales tax hike without voter approval

Legislators criticize extension of sales tax hike without voter approval

By ThisIsReno

By Phillip Moyer, Nevada News Bureau: Legislators this week voiced objections to the passage of Senate Bill 5 during the 2010 special session, which lifted the sunset on a temporary sales tax increase that was passed by voters in 2002.

Assemblyman Ed Goedhart, R-Amargosa Valley, was among those who voted against the removal of the sunset on a portion of a 0.25 percent sales tax increase, a measure that was initially approved by voters through Clark County Advisory Question No. 10: 2002 Fair Share Transportation Funding Program.

Though the explanation of the advisory question said the sunset would remain in place “unless extended by the vote of the people,” the bill to extend the tax was passed without voter approval.

Half of the sales tax increase — a total of 0.125 percent — was scheduled to sunset in either 2028 or when the tax increase generated total revenue of 1.7 billion.

Goedhart complained that the bill was introduced late in the evening on the last day of the special session and passed without detailed discussion or public hearings from taxpayer advocates.

According to Allison Blankenship, public information officer for the Regional Transportation Commission of Southern Nevada, the removal of the sunset will allow the RTC to sell an estimated $169 million in bonds.

Combined with revenue that would have been gained whether the taxes were allowed to sunset or not, the state will be issuing a total of $245 million in bonds for projects. The bonds, Blankenship says, have a tentative closing date of August 10.

But Goedhart objected to borrowing money against projected future revenue and likened the bill to the federal stimulus plans, saying, “I think everyone’s tired of stimulus plans.”

“At some point in time, you max out all your lines of credit. Just because you have a $10,000 credit card doesn’t mean you have to borrow $10,000 on it,” said Goedhart. “At some point in time, all those bills come due, and we’ve got no more income stream to leverage off of, and we’ve tapped out all of our lines of credit.”

Another legislator who voted against the bill, Assemblyman Don Gustavson, R-Sparks, said he believes it’s important for the government to promote but not create jobs, which the tax extension was intended to do. A better approach to job promotion, he said, would be lowering taxes to attract businesses to the state.

“Government does not create jobs. Government creates the atmosphere to create jobs by low taxes and business taxes,” he said. “We used to have a very low tax environment for businesses that come to Nevada. Right now, we keep raising taxes, and Secretary of State office fees continue to go up for corporations. Now all the companies that are leaving California are going to Texas and elsewhere where they have a better tax environment.”

Assembly Minority Leader Heidi Gansert also voted against the bill, saying voters originally approved a tax with limitations.

“I think it is important that, since it was created by a ballot measure, it go back to a ballot measure — or at least have a timed cap, or a time limitation, or an expenditure amount cap like in the original question on the ballot,” she said.

Legislative Counsel Bureau Director Lorne Malkiewich said there is no constitutional requirement for a vote of the people on the issue. The tax only went to vote was because the statute itself said the tax needed to be put to a vote before it was enacted, he said.

“The requirement for the vote was just something that the Legislature required in the first instance. There’s not any legal prohibition against amending it,” he said. “The legislature could have just imposed the tax outright without requiring a vote of the people, so they also could just amend the tax without requiring a vote of the people.”

Nevada Taxpayers Association President Carole Vilardo said that she left the legislative building before the section on extending the sales tax was discussed, not realizing that the provision was part of the bill.

“That was a policy decision, and, as an advisory question, was allowed,” she said. “But my preference, at very least, would have been to have established another sunset on it.”

Gansert also expressed surprise at Governor Gibbons’ decision to put the tax extension on the agenda on the final day of the special session, saying it goes against his anti-tax stance.

“It’s very contradictory to the stand that he supposedly has taken – to add something like that last minute, [which] extended the tax, and expanded the tax,” she said. “There was a cap on it, and we took the cap off – it’s indefinite.”

However, Assemblyman Tick Segerblom, D-Las Vegas, said that in a time of economic crisis, funding road construction by having Clark County citizens continue to pay taxes in the future at the same rate as they are now is preferable to waiting until the present revenue stream would be able to pay for the projects – or waiting for voters to extend the tax themselves.

“Life’s a tradeoff,” he said. “But right now [I] feel that good-paying jobs, which are actually […] taking people that are probably on unemployment and giving them a job where they’re building a road, is better for all of us than to worry about having to go back to voters and ask them to renew the tax.”

Geoffrey Lawrence, a fiscal policy analyst for the Nevada Policy Research Institute (NPRI), says the use of bonds to create jobs is essentially “mortgaging the future for the present.”

“When a state issues a bond to pay for any project, typically it’s going to cost them twice the cost in the long run because of the financing costs,” he said. “It actually imposes a larger burden on taxpayers than if it were directly funded with an incoming revenue stream.”

Lynn Hettrick, Gibbons’ deputy chief of staff, said that while he usually agrees with NPRI’s fiscal analysis, he doesn’t agree with Lawrence’s characterization of the bill.

Hettrick said that because Nevada’s tourism-based and construction-based economy is predicted to recover more slowly than states with economies that rely on industries such as manufacturing, promoting jobs in the state is important.

“Nevada needs jobs, and this was a method that was agreed upon by everyone as a way we could promote jobs as quickly as we can,” he said.

When the bill was discussed in the state Senate chamber, where it passed unanimously, legislators emphasized the importance of continuing road construction and providing construction jobs. Steve Holloway, the executive vice-president of the Associated General Contractors of Southern Nevada, said the bill would be extremely helpful to the construction industry, which has suffered greatly during the recession.

“We represent an industry that has laid off over 70,000 workers in the last two years and is getting ready to lay off thousands more. This bill will go far to help to turn that around,” he said.

When asked about whether funding jobs is a legitimate reason for the bonds, Lawrence said that he couldn’t say until he knew what jobs the bonds would fund – something that will not be finalized until June.

“It depends on the kind of jobs you’re going to do,” Lawrence said. “If you’re creating jobs just for the sake of jobs, that doesn’t really mean anything because we’re not putting anything of value into it.”

Blankenship says the projects will create an estimated 2,000 jobs, which will be advertised in August and September.

Las Vegas Chamber of Commerce spokesperson Cara Roberts emphasized how creating that number of jobs in this economy is “a big deal.”

“We are an economy made up primarily of small businesses,” she said. “We have a few larger corporations, but primarily we’re made up of small businesses. Small businesses are lucky to bring on one or two new jobs, particularly in this kind of recession, so 2,000 jobs is a huge number of jobs to be able to add back into our economy.”

Senate Bill 5 does not have any effect on northern Nevada. A ballot measure known as RTC #5 was implemented by the Legislature after voter approval in 2008, adjusting regional fuel taxes for inflation by increasing them one eighth of a cent per gallon. According to Felicia Archer, the Washoe Regional Transportation Commission public information officer, the bill will allow $250 million in bonds to be taken out for road work, and the bill is estimated to create 3000 Jobs.

A total of $90,393,370 worth of preventative maintenance and congestion relief projects have been planned for 2010 as a result of at least partial funding by RTC #5.

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