A faulty Nevada tax structure?
An unholy trinity of select Nevada business executives, elected officials and unions are trying to convince the electorate that the state’s budget woes are a product of an unsophisticated tax structure. They claim the creation of new levies would insulate government agencies from the hardships of a stagnant economy.
MGM Mirage Chairman Terry Lanni, in response to a teachers union initiative to raise the state gaming tax, wants a broad-based tax that hits all Nevada businesses. KVBC-TV owner and university system Chancellor Jim Rogers wants the Nevada Constitution’s income tax ban lifted so the levy can be imposed on corporations and the state’s wealthiest citizens. Scores of Democrats and a handful of big-government Republicans support a compromise cocktail of increases on existing taxes and new revenue streams to make sure state and local governments never again have to trim spending in the middle of a fiscal year.
If only we moved beyond our antiquated reliance on sales, gaming and property taxes, they say, Nevada governments wouldn’t be subject their third “crisis” of slower-than-anticipated revenue growth in 15 years. Gov. Jim Gibbons is preparing to make $440 million in spending reductions, about 4.5 percent of the state budget.
But Silver State governments aren’t alone in freezing new hires, delaying capital expenditures and considering operating cuts. Three recent, independent reviews of state finances have identified revenue shortfalls in nearly half the 50 states. A report released Tuesday by the Center on Budget and Policy Priorities estimates the deficits in 13 states at between $23 billion and $30 billion.
California’s budget shortfall could be as high as $14 billion. New York’s could total $4.3 billion. New Jersey’s could reach $3.5 billion, and Florida’s might hit $2.4 billion. Massachusetts is looking into a $1.2 billion hole. Maine, Rhode Island, South Carolina, Kentucky and Minnesota are looking for costs to cut and taxes to increase. Illinois, Connecticut, Michigan, Missouri, Wisconsin, Texas and Ohio are preparing for budget gaps over the next two years.
Even Nevada’s prosperous, fast-growing neighbor to the southeast, Arizona, is confronting the possibility of budget cuts totaling $1.8 billion.
Of note to Nevada’s big spenders: Most of the states facing fiscal challenges similar to Nevada’s impose the very taxes coveted by Mr. Lanni, Mr. Rogers and Co.
New York, New Jersey and California have some of the highest income and corporate income tax rates in the country. Connecticut, Maine, Massachusetts, Minnesota, Arizona, South Carolina, Michigan, Virginia and Missouri have personal and corporate income taxes, too. Florida and Texas don’t have personal income taxes, but they do have corporate income taxes. Minnesota, New York, New Jersey, Illinois and Connecticut impose a death tax.
These “grown-up” states have “broad-based,” “predictable” taxes, and they’re still short of cash.
The reality that Nevada’s cheerleaders for new and increased taxes choose to ignore is this: No tax structure is immune from the ebbs and flows of our market economy. No tax structure can continue to produce double-digit revenue growth amid the worst housing slump in more than a decade. When workers are socked with higher tax bills or grow worried about their mortgage or job stability, they spend less money. Less money passing between businesses, workers and consumers means less tax revenue for governments.
Over the past 15 years, Nevada’s reliance on sales, gaming and property taxes has allowed state and local governments to grow faster than the economy, faster than the state’s exploding population and inflation combined. The state general fund, which funds public education, higher education, welfare programs and law enforcement, has tripled over that period to more than $3 billion per year.
There is nothing wrong with Nevada’s tax structure. Nevada governments — and those of every state listed previously — just want more money to spend, plain and simple.
If the issue is truly a faulty tax structure, why aren’t Mr. Rogers, Mr. Lanni, Assembly Speaker Barbara Buckley, Senate Minority Leader Dina Titus and all of Nevada’s rich public-employee unions proposing a revenue-neutral overhaul? Why aren’t they proposing reductions in the state’s gaming, sales and property tax rates to accompany the creation of a “broad-based” business tax? This whole problem is about “revenue predictability,” isn’t it?
Nevada governments have plenty of money. An American Legislative Exchange Council report released this month, titled “Rich States/Poor States,” found Nevada’s tax burden beyond income, property and sales taxes was the highest of the 50 states. The gaming tax more than makes up for the state’s lack of personal and corporate income taxes.
Nevada doesn’t need new or higher taxes.