In the April 19 Nevada Appeal there was a discussion on the merits of adding services into our sales tax base. This is the 15th time that I know of that sales tax on services has been debated in the Legislature. Why do I mention it? Because exactly 30 years ago I was the first legislator to introduce a bill to add services into Nevada’s sales tax base.
So here we go again. Another legislative committee is arguing about commissioning a sixth study on the wisdom, or lack thereof, of enacting a sales tax on services. Somewhere in the archives of the Legislative Council Bureau there already exist reams of data from my 1983 study. Nothing has changed. The states that had a sales tax on services then still do. I was known as the “Father of the Service Tax.”
Now why did I, a Republican at that time, author such a bill — really a Democrat bill if there ever was one? Because we were in the same financial pickle then as we are today — too narrow a tax base. Gaming faltered and we were screwed. We desperately needed to broaden our tax base then as we do now. This is exactly what’s being said by today’s consultants.
I preached until I was blue in the face that our economy was already becoming more dependent on services than goods. And no one could foresee the tax-free goods problem the Internet has given us today. Adding tax-free goods into our equation and we are in deep do-do. Believe it or not, I had the promised votes in the Assembly to get my bill passed. But the Senate majority leader, a Democrat, told me he’d never allow it to come to a committee vote.
My bill would have cut our sales tax rate on goods in half, and then added in most services. We would have included all major services except medical and funeral. Of course the Democrats were screaming that this would be regressive because it would hit the little guy harder than the more affluent, but I proved otherwise that with legal, accounting and consulting services plus gardening, dry cleaning and a few other “luxury” services, the affluent would be hit hardest.
Interestingly, the group that raised the most hell in opposition to my bill were barbers and beauticians. For some reason they couldn’t figure out that hiding tip money from the state tax collector was no harder than hiding it from Uncle Sam, as many were already doing … As an aside, I lost my barber over this and had to hustle-up another one.
When the word got out that my bill included brothels to be sales taxed I got phone calls from all over the world wanting confirmation. Yup! The girls were in the game. That alone would have been a huge chunk of revenue and the best part was that it would have been happy revenue. I believe today’s legislators are too cowardly to enact an innovative tax. In the 1980s we still had some statesmen and women amongst the 63 of us. I don’t see any today.
Anybody who doesn’t understand that our tax base is far too narrow for stability in fluctuating business cycles is a moron. No, a state income tax will not suffice. Enact a state income tax and we can kiss economic development (diversification) goodbye. Our only “biggies” to attract healthy companies to Nevada are 1) No state income tax, and 2) Right to work.
Sales taxing both goods and services while reducing the sales tax rate will solve our fiscal problems and be more acceptable to voters. The State of Washington, which also has zero state income tax, has relied for years on sales tax on services and goods as its main source of revenue.
Bob Thomas is a retired high-tech industrialist who served on the C. C. School Board, the Nevada Welfare Board, the Carson City Airport Authority and as a three-term state assemblyman. His website is www.connfessionsoftheentrepreneur.com