By Mary Lau
The 81st Session of the Nevada Legislature will begin in just a few weeks, and yet again our legislators are facing a substantial budget deficit, this time due to the COVID-19 pandemic. However, this time, our Nevada legislature has an opportunity to do more than apply a bandage; instead of another rushed tax hike, it’s time for our legislature to ask themselves if Nevada’s system of taxation makes sense in the post-COVID economy.
The COVID pandemic has created a perfect storm for Nevada’s state budget that is built on the unsteady foundation of tourism dollars. Any time there is a hiccup in the economy the cycle repeats. Tourism dollars decline, resulting in layoffs and increasing unemployment, followed by a reduction in sales and business tax revenues. When the Legislature convenes, they do their best to plug the holes in the budget, justifying that the program cuts (or tax hikes) are temporary, just until the economy recovers, only to continue the cycle.
This year we have an opportunity to change the conversation. COVID has presented an opportunity for Nevada to modernize and optimize to ensure our state is competitive in the national and global markets in the future. COVID has brought to light that consumer behaviors are changing, and our tax base is not keeping up. For example, a paperback book purchased in a store is subject to sales tax; however, an e-book is not. A video game purchased in a store is subject to sales tax; a downloaded video game is not.
Nevada is not the only state that is facing budgetary challenges as a result of the COVID-19 pandemic, but Nevada also cannot afford to be left behind when the economic recovery begins. Even now, in the middle of the pandemic, not a day goes by that there isn’t a news story about another business fleeing California or New York City. Other states are already doing the research and having conversations to make sure they are competitive when the time comes. Our Nevada legislature would be foolish not to spend this time laying the groundwork for the future, too.
If we continue doing as we have always done, we will continue to get the same results. Nevada should have learned in 2009 that tourism dollars are not guaranteed. The COVID-19 pandemic is not something we could have planned for, but it is certainly something we can learn from. The world economy is changing, and if Nevada does not start taking steps to modernize, we will find ourselves left behind. In the months and years the competition between states for business will only increase, and if we aren’t careful, Nevada won’t be their new destination.