Economic Reality Makes This Legislative Session Different

(Michael Chamberlain/Nevada Business Coalition) – The times they are a-changing. And not everyone is keeping up.

Tuesday, at a luncheon held by the Keystone Corporation Republican Governor Brian Sandoval reiterated his opposition to any tax increases and squashed speculation he may trade education reform, redistricting, or other items in exchange for agreeing to tax increases. In response, Assembly Speaker John Oceguera (D-Las Vegas) dismissed the governor as “irrelevant in the budget process.”

Oceguera and other opponents of the governor’s budget plan have offered no alternative plan of their own. They have been content to criticize and rely upon their allies among the education establishment, government unions, and the media to preach gloom and doom and relate stories of impending calamity if the governor’s proposed spending cuts are approved. In the past, such tactics have succeeded in influencing legislators who lacked a strong commitment to fiscal responsibility. They have so far been unsuccessful this time.

Both Assembly Minority Leader Pete Goicoechea, R-Eureka, and Senate Minority Leader Mike McGinness, R-Fallon, said their caucuses are united in support of Sandoval and in opposition to tax increases.

The 2/3 threshold to increase taxes and to override a governor’s veto cannot be met without some members of each of these caucuses abandoning Sandoval. Despite some earlier expressions of weakness, their support for the governor’s budget appears to have strengthened during the legislative session.

A Las Vegas Sun article contrasted the messages delivered by UNLV President Neal Smatresk and new Clark County School District Superintendent Dwight Jones in separate private meetings with local business executives. Unnamed executives quoted in the story were much more receptive to Jones’s approach. One said of Smatresk’s apocalyptic pronouncements,

“You can’t argue gloom and doom. People don’t want to hear it right now, not when hundreds of thousands remain out of work or have had their hours cut.”

In the past, it had been precisely these types of closed-door meetings from which agreements on tax increases had emerged, often raising taxes on those not invited to the table. Hyperbole and sky-is-falling rhetoric have persuaded members of the business community to support higher taxes. That has not happened this time.

In the Reno Gazette-Journal, UNR economics professor Elliott Parker proclaimed,

“We need to revamp our tax structure to replace our falling revenues with something broader-based, more stable and more efficient.”

Yet he himself acknowledges significant problems with every potential tax increase example he discusses in the piece.

There is no silver bullet. Other states with more and broader and higher taxes have deep budget problems as well. And in this fragile economy the negative consequences of tax increases on economic growth are magnified.

This session is different than those of the past. Proponents of big government have always been able to rely on certain tactics to weaken the resolve of colleagues on the other side of the aisle. Those same tactics have not worked this time.

The private sector has been decimated in the last few years. Nearly 200,000 Nevadans have lost their jobs, thousands of businesses have closed their doors, and thousands more are hanging by the thinnest of threads. For some of them even the smallest tax increase or reduction in their customers’ disposable incomes would be enough to force them out of business. The drag that tax increases would exert on the economy would more than offset any expected increases in collections.

Revenues to the state are not going to recover until the private sector once again begins experiencing significant growth. Raising taxes is only going to delay this from happening. The way to increase tax revenue is by encouraging private sector business growth, not raising taxes.

Those with an interest in bigger government continue, as usual, to ignore the reality of the situation we’re in. The difference this time is that members of the business community, the governor and the members of the legislative minority understand reality and are acting accordingly.

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