Norquist to Nevada Legislature: Reject Gibbons’ Tax Hikes

(Grover Norquist) – Dear Members of the Nevada Legislature. As you begin the 26th special session of the Nevada legislature, I write to urge you to reject Governor Gibbons’s proposal to force out of state retailers to collect Nevada’s sales tax, as well as his proposal to single out the mining industry for higher taxes.

The proposal to require out-of-state retailers to collect and remit the state’s sales tax on products purchased online by Nevadans is particularly troublesome and likely unconstitutional. This not only attempts to circumvent federal interstate commerce law; but it would also put the state at a competitive disadvantage, force small Nevada companies out of business, invite a costly legal challenge, encourage online-black markets, and – worst of all – potentially raise taxes on Nevada residents.

While this bill is scored as a tax increase, it will also raise little to no tax revenue. When passed in Rhode Island, the affiliate nexus tax was estimated to raise no additional revenue, and this has now been confirmed by the Department of Revenue. This is a result of out-of-state retailers ending in-state advertising agreements to sever their nexus.

I also urge you to reject Gibbons’s proposal to raise taxes on a key source of jobs in Nevada, the mining industry, through the elimination of tax deductions. Despite what the Administration claims, this is a massive tax increase.

An important factor in fostering a business climate conducive to job creation and economic growth is predictability when it comes to tax and regulatory burden. Removing deductions that the industry has factored into its business model and investment decisions for years will send a negative signal to all businesses that Nevada is not home to a predictable tax and regulatory system.

There is ample evidence that cutting spending, as opposed to raising taxes, is the most economically preferable method to closing budget deficits. The Federal Reserve Bank of San Francisco recently published an article summarizing research on economic multipliers. It turns out that a dollar of government spending results in 70 cents of job-creating activity after two years. A dollar in tax cuts results in $1.30 to $3 of job-creating activity after two years.

Put another way, a $1 cut in spending reduces job-creating activity by 70 cents. However, a $1 increase in taxes cuts job-creating activity by as much as $3. With double digit unemployment in Nevada, there is perhaps no worse time to raise any taxes.

As you continue to weigh options to rectify Nevada’s fiscal challenges, I urge you to oppose all tax increases for the reasons highlighted above. If you have any questions, please contact Patrick Gleason, ATR’s Director of State Affairs, at (202) 785-0266.

(Mr. Norquist is president of Americans for Tax Reform in Washington, DC, and national sponsor of the Taxpayer Protection Pledge)