(Jim Clark) – As the two leading gubernatorial candidates criss-cross Nevada promising not to raise taxes leaders in the Nevada Senate and Assembly are quietly looking at new “revenue enhancements” for the Silver State.
State Sen. Steven Horsford (D – Las Vegas) first proposed a corporate income tax but then withdrew the idea. Republican Assembly Minority Leader Pete Goicoechea (R – Elko) proposed a sales tax on food but promptly backed away from the idea when conservative activist Chuck Muth organized a statewide phone campaign urging fellow conservatives to call Goicoechea with the message: “don’t tax my meat, Pete”.
Nevada’s projected $3 billion budget hole is a huge challenge but before rushing to impose new tax levies lawmakers should take a close look at our neighbor to the north. Last January, after years of voting down tax increase proposals, Oregon voters went to the polls and approved, retroactive to 2009, a 20% income tax increases on those making more than $125,000 per year, a 22% hike on those making over $250,000 and business tax increases by as much as 1,400%. Overall the new taxes were expected to increase revenues by 10%. During the campaign tax increase proponents cited the sanctity of the K-12 budget as the primary reason to vote for the increases. This was a big victory for public employee unions who raised $6.85 million to fund the campaign.
After a mere 7 months of the new, higher tax rates Oregon’s budget situation has only grown worse. Despite the increased tax rates Oregon is $577 million below budgeted revenues and term-limited Democratic Governor Ted Kulongoski has been forced to impose across-the-board 9% spending cuts including K-12 education. In the final analysis the school budget got cut anyhow.
Another adverse but expectable reaction to Oregon’s new tax rates was an exodus of business. Medford’s ComNet Marketing, a provider of marketing and fundraising services to non-profits with $5 million in annual sales, is pulling up stakes and moving to . . . yep . . . Nevada. “It was purely a business decision” said CEO Bruce Hough, “since Nevada has no corporate income tax the move will eventually pay off.” He predicted that Oregon’s corporate tax revenues will gradually fall as more businesses see the light and move elsewhere.
“The lesson here” said Greg Leo of the Oregon Republican Party “is that taxing the rich and business actually reduces the amount of revenues collected.” Observing from afar the Las Vegas Review Journal wrote in an editorial about the Oregon phenomena: “Not only is this a another classic example of how individual wage earners adjust their behavior in order to minimize their tax burdens, it again highlights how calls to “stabilize” Nevada’s tax base through creation of a state or corporate income tax would likely have the opposite effect.” Dr. Arnold Laffer, a University of Southern California economist and advisor to the Reagan Administration, devised the “Laffer curve” demonstrating how lower tax rates produce higher tax revenues because the energized economic engine produces more goods and services than at higher rates.
This bad news could come back and haunt Democrats at the polls this year. The most recent Rasmussen poll shows Republican Gubernatorial Candidate Chris Dudley holding a 49% to 44% lead over his Democratic opponent John Kitzhaber in that very blue state.
I hope Oregon’s lesson is not lost on Nevada legislators.
(Jim Clark is President of Republican Advocates, a vice chair of the Washoe County GOP and a member of the Nevada GOP Central Committee. He can be reached at email@example.com)