Remember that story of the little Dutch boy who put his finger in the dike and saved his town from disaster? Great lesson. One person, knowing just where to apply the fix, can save everybody. For most of the last three decades, Carole Vilardo has been a grown-up Dutch lady protecting us from a flood of bad tax policies. Vilardo, longtime president of the Nevada Taxpayers Association (NTA), is arguably Nevada’s Top Gun on taxes. When it comes to tax debates, the devil truly is in the details. Vilardo is a 50-volume encyclopedia on tax topics. No detail is too small; no tax fact is left uncataloged.
This may be Vilardo’s year. Nearly every state in the nation, it seems, is searching for new tax solutions. Forty-three states have declared significant budget shortfalls for this fiscal year. Here in Nevada, the Governor’s Task Force on Tax Policy in Nevada is working hard, searching for a long-term solution to our state’s never-ending cycle of chronic budget shortfalls. The process could produce a host of new Nevada taxes. “There is no perfect tax system,” says Vilardo. “If there were, every state would have the same tax system in place in exactly the same proportions.” With 43 states struggling, each with uniquely different and separate tax systems, it appears Vilardo may be right.
Vilardo and the NTA have some suggestions to make before Nevada goes headlong into new taxes.
1. Make certain we are getting full value out of the existing system. The Attorney General’s office is in the process of clarifying who is entitled to the collection allowance on the use tax for Internet sales. This would generate an additional $5 million to $7 million revenue a year. However, it can’t be implemented at this time because the Department of Taxation’s computer system can’t handle the change. The message is: Make the current system work before we add new taxes.
2. Any new tax system needs to have as few exemptions as possible. When allowed, exemptions erode the tax base and too often are based on special-interest group pressure.
3. Tax systems should not cause an individual or business to make economic decisions. If tax deductions are allowed for the purchase of new equipment, but not for providing employee health insurance benefits, a company may choose to eliminate health coverage and purchase equipment instead. That maximizes a company’s use of capital, but it may not be what the company needs or values most.
4. Do not create taxes in which multiple government jurisdictions compete for the revenue. Nearly every governmental entity receives sales tax revenues — schools, local entities and state government. Each one views the sales tax as “its” tax. Too often, each jurisdiction in its quest for revenue will seek to increase its income, potentially creating a combined rate that borders on being too high. Cigarette taxes are another example. For years, these taxes were used exclusively for the benefit of local governments. In 1983, local governments came to the Legislature seeking an increase. The Legislature approved the increase, but assigned the revenues to fill a state government need, stiffing the locals. Cigarette taxes were increased again in 1987 and —you guessed it — once again the state took the money.
For more information about taxation in Nevada, visit the Nevada Taxpayers Association Web site at nevadataxpayers.org. A good overview of budget and tax principles may be found by choosing “Tax Topics” and selecting the April, 2001 issue.
