Nevada Confidential

   A few years back, a political candidate did a brilliant job in a televised debate by using the slogan from a popular Wendy’s TV ad.  His opponent had spoken of having “new ideas” - he leaned forward and said, "When I hear your new ideas, I'm reminded of that ad: 'Where's the beef?'"

   Being a policy nerd, I actually had looked forward to reading Rory Reid’s 30-page vision for Nevada:  “Virtual Crossroads.”

   I regret to report that, after reviewing it in detail, I not only don’t see the beef – I don’t see the bun – all I hear is the sizzle.

   While it presents a sensible, generally-accepted diagnosis of the problems Nevada faces – it offers no substantive prescription for a cure.

   Sure, it points in a general direction, but that is about as useful as a doctor telling you to “eat well; get plenty of rest; and drink lots of fluids.” 

   The “specifics” he quotes from it are usually:

 ·    “we need a long-term plan for infrastructure rebuilding”  Sure. Yet, the fundamental problem isn’t that we need more plans drawn up - the Nevada Department of Transportation, as well as each county and city transportation department, have file cabinets full of plans.  We need the resources and the commitment to move forward now.  Enough of this planning, already.  Let’s salvage our infrastructure before it deteriorates any further – and let’s put people to work.  Now – not after another round of planning.

 ·    “perform performance review of state government to reduce wasteful spending”  That’s a rather obvious observation.  Every agency of state government has been repeatedly doing that.  It is not that more couldn’t be done.  But, the impression that we can fund adequate services in Nevada by just cutting out the “fat” in the state government is totally naive and unrealistic.  This is unproductive, cynical pandering for votes.  A real leader tells it like it is.

 ·    “provide tax credits to businesses who hire new workers”   Here the vision statement points to a recent Colorado initiative to give businesses that create at least 20 new jobs a 50% credit for the taxes paid on each new employee.  With their system, that equals a credit of about 3.8% - which is a reasonable savings.  However, in Nevada, our payroll tax is only 0.5% - cutting that 50% would give a typical per-job savings of $50 per year.  Show me any company that will hire a new person because of a fifty-dollar savings!  This is not how you transform our economy - this is fluff.

   I could go on-and-on critiquing each section.  Many simply draw the practical question:  “But where is the money for this going to come from?” to which you won’t find any answers.  At best, you hear the old refrain “Growth will pay for Growth.”  If we haven’t learned anything in this painful economic slowdown, haven’t we learned that is not true?  It’s a Ponzi scheme – a few did well - and the rest of us taxpayers are left on the hook.

   Ok, we are at a Virtual Crossroads (who doubts that?) -- but the question is: “how should we move forward?”  Sizzle is not an acceptable answer.

 While every penny of funds that provide “enrichment” to the educational system is being squeezed out of the budget, there is one-half billion dollars in untaxed “church” property in Clark County, alone ($509,040,418 of Assessed Value exempted in FY 2009-2010)

 For every dollar which the government does not collect on these properties, it must make up for by collecting it from taxpayers.  This exemption has grown from a well-intentioned generosity by early lawmakers into a vast tax expenditure.  If this property were on the tax role, the schools and local units of government in Clark County would split an additional $18 million per year.  Any law that lowers a particular property owner’s tax liability has no different effect than a law that requires a direct payment to that property owner.

The basic facts on which properties receive this exemption – and why – should be compiled, made public and evaluated.  Then, explicit policy decisions must be made as to how much exemption should be given; to whom; and for how long. 

Nevada currently falls far short of even compiling this type of statistics, doing less than virtually any other state to make objective data available about where tax breaks are actually going and how much they costs.  This information can help us all - policymakers and taxpayers – to achieve reasonable oversight of these large tax expenditures.

    One step in seizing control of Nevada’s budget problem is to shine light on the murky, shadowy and under-the-radar parts of the state budget known as “tax expenditures.”  These are losses to the state treasury resulting from politicians having granted certain deductions, exemptions, or credits to specific categories of taxpayers.  These exemptions work like welfare programs for special interests and make up a substantial part of the budget. 

    Nevada is one of only 8 states in the US that does not compile a “tax expenditure report” – something with details on where state tax breaks are going and how much they cost.  Such a report is a necessity as we seek to restore fairness, sustainability and transparency to the state tax system.

    This relevant information would help us all - policymakers and taxpayers – to evaluate the hundreds of credits, exemptions, deductions and exclusions that permeate the Nevada tax base, turning it into Swiss cheese rather than a sensible tax code.  The worst part is that, once exemptions are written into the tax code, they continue indefinitely — regardless of how costly, dated and unfair they may become over time.

    Every dollar the state forgoes in tax revenue is one less dollar it can spend on schools, law enforcement, or other priorities — and one more dollar it must raise through other taxes.

    It is time we have an annual, comprehensive, easy-to-understand “Tax Expenditure Report” and make it widely assessable on the state’s website.

    After days of playing budgetary chicken, the Special Session of the Nevada Legislature ended with a gimmick-ridden budget which solved nothing – only digs a deeper hole that will have to be dealt with in the future.  Cynical commentators described their actions as: “kicking the can down the road.”

    People across Nevada are fed-up and frustrated, anxious and angry, and so am I.  Today, as opportunities are disappearing before our eyes, much of government doesn’t even function as well as it has in the past.  Average taxpayers are feeling the squeeze of lesser services while the special interests are as comfy and arrogant as ever.

    Meanwhile, tepid, risk-averse political “leaders” of both parties ignore any suggestion that might possibly offend someone powerful; and scurry-about trying to patch-up this sinking ship by borrowing from our future – and our children’s future – just so it doesn’t sink on their watch.

    We can’t endure with these short-term, band-aid solutions.  I want to reform Nevada's tax system so that it facilitates economic growth by being simple, balanced, competitive and efficient.  Something is fundamentally wrong with a system where the poorest 20 percent of Nevadans pay 8.3% of their income in state and local taxes, while the richest 1 percent pays less than 2% of their income.  In other words, the tax burden on Nevada’s working poor is more than four times that of our wealthiest residents.

    Now is the time for enlightened leadership to take decisive action to fine-tune expenditures, eliminate bureaucratic obstacles, find more efficient ways of delivering services, and significantly broaden the burden of tax payments to better reflect the current realities of our state.

    During the next few days I will offer some specific suggestions of the kind of proposals that I think should be considered.

          More than ever, Nevada must act to cultivate a thriving and globally competitive economy with a diverse business base, enabling job growth and prosperity.  We will not get ourselves out of this economic recession by competing with dozens of other states to lure large, multi-national corporations to locate here.  Rather, we must help grow and strengthen thousands of small and medium businesses that employ 5, 10 or 50 individuals in communities across the state.  Let’s start with the niche we are famous for worldwide; and launch creative new efforts to develop jobs delivering new, cutting-edge gaming products, services and experiences. 

• Intra-Nevada Remote Gaming

          State gaming regulations should be changed to allow individuals to establish an account, then place wagers anywhere in the state using specially created wireless devices, cell phones, computers, in-home & in-room cable-TV boxes and kiosks. The bets could be on sporting events, live 2-way table games or virtual games conducted by a computerized random-number generator.  Similar systems are in-place and working well in many parts of Europe.  By doing this, Nevada companies will have increased revenue resulting in the creation of more jobs and the generation of more taxes.

•  Nevada’s Global Innovative Gaming Initiative

          By launching Intra-Nevada Remote Gaming, we would establish Nevada as the worldwide epicenter of the fast-growing, regulated, interactive gaming industry.  California, Florida, New Jersey, Illinois, & Washington, DC - as well as the federal government - are currently reviewing legislation for allowing citizens to further utilize remote gaming. 

          The emerging regulated remote gaming market in North America alone is projected to be worth $13.4 billion in the next few years. (According to H2 Gambling Capital, London, the leading supplier of data and market intelligence regarding the global gambling industry.)

          Nevada can be the “Silicon Valley” of this new high-tech gaming industry – or not.  Thousands of jobs can be created in Nevada – or not.  As it looks right now, that’s not going to happen.  Nevada has not been encouraging, or even hospitable, to the global remote gaming industry.  This spring, the Global iGaming Summit & Expo will, for the tenth year, convene in Canada – not feeling welcome in Nevada.  That attitude must change if we are take advantage of the impending re-invention of gaming.  Remote wagering on horse racing is legal in most of the states in the US – but not here. 

          Nevada can be at the cutting-edge of this huge opportunity – or we can watch it go by and be viewed as a quaint and increasingly irrelevant part of Americana.  Those who now grow-up with i-phones and playing wii aren’t likely to be attracted to playing out-dated slot machines in our casinos when they turn 21.  But, implementing a Global Innovative Gaming Initiative is a real step to a thriving and globally-competitive economy

     Nevada can be the center-point for the impending convergence of digital entertainment, e-commerce, wireless gambling, skill-based games, person-to-person wagering, traditional casinos, virtual reality, and the use of cable and satellite TV for delivering interactive gaming content – or not.  The next Governor can make the difference.