After adding plenty of suspense to what many legislators considered a slam dunk, the state Senate voted 16-5 Tuesday to increase the hotel room tax by 3 percentage points.
Although the Legislature is barely one month into the 120-day regular session, it faced a Friday deadline to act on the plan, which will increase the room tax rate to 13 percent in most of Clark County. The Assembly passed the proposal last month.
The state teachers union collected about 130,000 signatures to put the issue before Clark and Washoe county voters last year. Voter support for the advisory question brought it before the Legislature. If lawmakers rejected the tax increase or failed to vote on it by Friday, it automatically would have advanced to the November 2010 ballot for a binding public vote.
The larger problem, however, was the petition’s language, which dictates that starting on July 1, 2011, the new room tax revenues be used solely for “student achievement” programs or pay raises for teachers. The tax increase has no accountability measures for defining which programs might improve achievement, and attaches no performance standards to pay raises for teachers.
In addition, revenue from the room tax increase will be every bit as volatile as sales and gaming levies — remember, Democrats have promised to restructure state taxes to make them more stable — because they’ll be assessed on room rates, which have nosedived over the past year. And when the economy recovers and room rates rise, the state will have a windfall to build into future baseline budgets, which will result in demands for further tax increases when demand for hotel rooms inevitably shrinks.
And then there’s the troubling fact that almost every dime of state revenue raised from this tax increase will be taken from Clark County, the worst local economy in Nevada, and that a significant portion of this money will be shifted to rural counties and the Reno area. It takes tourist and conventioneer money that could have supported taxpaying, resort industry jobs and shifts it to cover government salaries.
Gov. Jim Gibbons, with his precision political clumsiness, announced after Tuesday’s vote that he would neither sign nor veto the room tax increase, meaning it will become law. But if inaction is supposed to represent the governor’s commitment to his “no new taxes” pledge, why was the room tax hike built into the budget he presented to lawmakers?
This legislation is bad policy that soaks the state’s already-shrinking tourist trade and sets up the Legislature for more budget problems down the road.