Deconstructing Nevada

(Michael Chamberlain/Nevada Business Coalition) – On Day 88 of the 120-day session, Legislative Democrats finally presented their tax plan. Anyone who thought they were safe from the voracious appetites of big-spending politicians has a little surprise coming.

The proposal would increase the tax burden on Nevadans by $1.5 billion in tax increases.

NPRI’s Geoff Lawrence issued a scathing critique of the plan and its destructive effects on the state’s economy.

“If the goal of legislative Democrats is to cripple the long-term potential for growth in Nevada’s economy, this plan is the perfect vehicle. Their proposal to seize more wealth from private families and transfer it to highly-paid government bureaucrats signals a singular arrogance on behalf of the majority-party leadership toward hard-working Nevadans. 

“Nevadans in the private sector have seen their standard of living decimated over the past three years while government workers, feeding off private workers’ productivity, continue a life of luxury about which most taxpayers can only dream. ‘Effective’ unemployment in the private sector is still approaching 24 percent, while many workers who have retained their jobs have seen dramatic reductions in wages and benefits. Yet public-sector pay — already higher than comparable private sector rates prior to the recession — has continued to increase for many. This is a caste system, and a direct insult to Nevada taxpayers.”

The reason for the budget shortfall is evident on page 5 of the Democrats’ proposal. From 1991-2003 inflation-adjusted revenues were fairly flat. But, with the combination of the 2003 tax increases and the inflation of the housing bubble, revenues exploded and spending exploded to keep pace.

Like too many people during the boom, the government spent the money as fast as it came in, implementing massive increases in spending. Like those same people who overspent during the boom, the state couldn’t afford the additional spending it had taken on when the bubble burst and revenues plummeted.

Rather than face economic reality and cut spending last session, Legislators imposed temporary tax hikes and used one-time funds to close the budget gap, putting off the hard choices until the future. Essentially the state cashed out its 401(k) and took a gift from its formerly-rich uncle to pay the bills. And that future is now.

Unlike the individuals who overspent during the good times and can’t force their bosses to rehire them or restore their former pay, however, the state of Nevada can enact laws to take money away from people against their will. This is what the Democrats’ budget plan represents.

It will impose an even greater hardship on those who have already suffered the most during this recession, the businesses and families who work in the private sector. These are the people who have borne the brunt of the downturn, losing their jobs and homes, taking massive cuts in their wages and benefits, forgoing pay and dipping into their savings to keep their businesses afloat. This tax plan will pile yet another layer upon them.

Even those elements of the plan that may be beneficial, such as the elimination of the Modified Business Tax, are not all that they seem. The MBT will disappear over the next few years. Yes, just like the MBT increase enacted in 2009 that was supposed to disappear this year and which this proposal restores. Once in place taxes never disappear.

From this proposal it appears the majority party is intent on deconstructing Nevada.

(Michael Chamberlain is Executive Director of Nevada Business Coalition.)