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OPINION: Wanna talk tax restructuring? OK, let’s talk

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By Chuck Muth

Although I fear it to be nothing more than a Trojan horse for higher taxes for bigger government, the calls for a restructuring of Nevada’s tax system to “broaden” the burden continues unabated.  So let’s talk about it.

First, the only way to restructure the tax system in the upcoming legislative session without violating Gov. Brian Sandoval’s pledge not to raise taxes and fees is to adopt a reform plan which is revenue neutral.  In other words, any shift would have to result in no net increase in the amount of money coming from taxpayers and going to the government.

And the only proposal out there that I’ve seen which does this and has a ghost of a chance of passing is the conservative Nevada Policy Research Institute’s proposal to extend the existing sales tax to certain services.

The key to making the proposal truly revenue neutral is to determine what the rate of taxation for the combination of products and services needs to be to generate the same amount of revenue as is currently being generated strictly from the sales tax on goods.  That way there’d be no net tax hike on consumers.

Now here’s the down side, and legitimate beef, conservatives such as myself would have with this proposal: Down the road, once government wishes to grow again (and it will!), legislators will pass a sales tax hike which will then apply to both product purchases AND service purchases.  And before you know it, we’ll be back at 8 percent for both products AND services.

Which is why any such tax reform measure to broaden the sales tax MUST be comprehensive – and by that I mean it MUST include serious spending and tax restraints that conservatives MUST insist on before signing off on any such “broadening” proposal, including a hard spending cap on future budgets, a super-majority vote requirement for all tax hikes appearing on the ballot, and universal school vouchers to help attract new businesses to the state.

Now here’s the kicker….and the reason why NOW is the time to make this change if we’re ever going to.  As the economy recovers, tax revenue from both products and services will automatically increase without increasing tax rates or adding any new taxes.  At that point the Left will demand that we spend it and the Right will demand that it be rebated.  But that’s a discussion we can have another day.

If those calling for tax reform are serious about revenue neutral tax restructuring to broaden the tax burden and aren’t using this as a trick on taxpayers to raise tax revenues, there’s something here for conservatives to talk about.  Otherwise, this conversation is over.

(A more detailed version of this column can be found at www.MuthsTruths.com)


Chuck Muth is president of Citizen Outreach, a non-profit public policy grassroots advocacy organization.  He may be reached at [email protected].

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