The myth of the 'temporary' tax hike
Gov. Sandoval proposes to raise taxes yet again
- Wednesday, March 14, 2012
During the waning days of the 2009 legislative session, Steven Horsford and his Democrat colleagues in the Nevada Senate worked hard to raise the tax burden on Nevada families.
Their goal was to insulate state and local bureaucrats from the impact that the economic recession had wrought on private citizens.
To do this, they proposed to increase the statewide sales tax, to double the tax on private-sector payroll, to double the cost of business licensing and to adjust the allowable depreciation schedule for motor vehicles — ensuring that Nevada families would face higher registration costs each year.
They succeeded in imposing the higher taxes, but they were only able to do so by coaxing out support from some counterparts in the Republican Senate caucus.
The late Bill Raggio — then Senate minority leader — indicated that he could support these tax increases only so long as they were used as a temporary stopgap measure and that they would disappear at the end of the 2009-11 budget cycle. Raggio also insisted that the tax increases be accompanied by long-term cost-saving measures, including reform of the Public Employees' Retirement System.
Only after receiving these assurances did Raggio and four of his eight Republican Senate colleagues agree to raise taxes during that budget cycle.
The 2009-11 budget cycle has come and gone. Yet, those tax hikes remain in place.
Yesterday, Gov. Brian Sandoval announced he supports extending those "temporary" tax hikes even further — through at least the end of Fiscal Year 2015.
Those "temporary" taxes are starting to take on the suspicious appearance of permanent taxes.
Sandoval blames his desire for additional taxes on new federal mandates arising out of the Patient Protection and Affordable Care Act — popularly known as "ObamaCare." And it is true that ObamaCare imposes unparalleled unfunded mandates onto the states. Disingenuously, in passing the legislation, President Barack Obama and the 111th Congress enacted a colossal entitlement expansion that they were not even willing to pay for.
One of the central ploys by which ObamaCare seeks to expand medical coverage is by forcing states to loosen Medicaid eligibility requirements. This requirement, in tandem with the individual mandate provision that will punish individuals who do not purchase a government-approved insurance policy, will push 16 million new individuals onto state Medicaid rolls nationwide.
An econometric analysis performed by the Nevada Policy Research Institute shows that these requirements will cause an immediate doubling of enrollment in Nevada Medicaid in 2014. For three years thereafter, the state will receive additional federal funding to cover 239,000 of these new enrollees. For another 65,000 new enrollees, however, there will be no additional federal funding. This will impose a large and immediate new liability onto the State of Nevada, displacing the state's ability to provide other services, such as K-12 education.
NPRI has repeatedly warned of this danger in ObamaCare. It is also why, earlier this month, the Institute published Solutions 2013, an 88-page guide for policymakers that, among other things, shows how to reduce expenditures in other areas and thus offset the heavy state liabilities created by ObamaCare.
Solutions 2013 points out very specific ways to improve the efficiency of the state bureaucracy — ways in which policymakers can meet ObamaCare's prospective financial burdens without sacrificing either Nevada taxpayers or the quality of state services. Moreover, Solutions 2013's recommendations don't merely reference theoretical savings that could result from unproven policies: They point to proven reforms already implemented in other states.
In addition to the Solutions 2013 sourcebook, Sandoval and lawmakers still have the still-not-implemented list of cost-savings identified by Nevada's bipartisan Spending and Government Efficiency Commission. With resources like these in hand, the governor and legislators should easily be able to meet ObamaCare's mandates without resorting to higher taxes.
With ObamaCare, Gov. Sandoval was dealt a bad hand. Still, it is troubling that he would so quickly fold his cards.
Nevada taxpayers deserve better.
Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute. For more visit http://npri.org.