Hoover-nomics for Nevada?

By Steven Miller
  • Monday, September 16, 2002

Nevadans do not want their taxes raised for the purposes the governor and the Democratic tax hawks in the Nevada Assembly say they want to raise them.

The governor and the tax proponents are convinced that they know better on this matter than the voters. But a great deal of evidence suggests that, in this case, the greater wisdom lies with Nevada’s citizens.

A bit of background: In a statewide survey of 600 voters reported in early August by the Reno Gazette-Journal and KRNV-TV News4, 59 percent opposed raising taxes “if the money were spent on schools, higher education, social services, prisons and other state programs,” according to the Reno daily.

Those first four categories are precisely those cited by administration officials and Assembly Democrats when they argue that Nevadans should pay more taxes. Obviously, there is a major disagreement between the state’s current political leaders and those who elected them.

But there is even greater significance here. Consider the full context: For the last four years, the administration and Assembly Democrats have been making the case for higher taxes on an almost daily basis. But even after this four-year campaign, they’ve failed to convince the public.

So what is going on? First, as the Gazette-Journal / News4 poll makes very clear, Nevada voters reject the tax-hike campaign at its core: They don’t believe that putting hundreds of millions of new tax dollars into the state’s major tax-consuming programs would really return enough new real value to the statewide community to make the expense worth the cost.

On this point, the public is surely correct. Each of the four specific categories of state government expense mentioned in the poll question are areas of state-privileged monopoly. The first two especially—tax-supported government K-12 education and the state college / university system—already eat up 52 percent of the state general fund budget. The same two have also, for years, erected defenses in depth against any real reforms. Knowing this, voters recognize intuitively that the marginal utility of more tax dollars in these areas would be extremely low.

A second thing going on most likely is that voters are also reacting against a particularly disingenuous assumption that tax advocates always smuggle into this tax debate. That assumption? That Silver State taxpayers must fund services for everyone who wants to show up on Nevada’s doorstep. You can hear this notion right in the definition of the so-called “structural deficit” problem: “Our revenue stream is not keeping pace with population growth.”

Observe that there is a problem here only to the extent that the State of Nevada keeps attempting to socialize, or collectivize, the costs of newcomers’ services. To the extent that individuals moving to Nevada are expected to pay their own way, the entire problem evaporates. Yet so long as Nevada’s political establishment continues to insist on its old, failing, essentially socialist model for public school funding, no amount of tax money will ever fix the state’s budget—or education—problems.

Finally, there is likely a third reason why Nevada voters are emphatically rejecting the new tax burdens being peddled by the state’s political class. That reason is our increasingly hard-pressed and struggling economy—both here in Nevada and across America.

Today unemployment is growing again and the overall economy is stumbling back toward a serious “double dip” recession—or worse. Naturally in such circumstances Nevadans are uneasy about permitting new taxes—which are always economically destructive. Economists agree with them: When your economy is beginning to flounder, it’s the last time in the world to slap on substantial new taxes. Yet this is exactly what state tax proponents are eager to do.

Amazingly, Nevada’s tax-hawks are effectively following the infamous example of former President Herbert Hoover. Facing similar economic circumstances in 1932, Hoover prepared a massive tax increase bill that Congress passed into law as the Revenue Act of 1932. Those new and heavier federal taxes, coupled with a rising tax burden at state and local levels, played a major role in turning a business-cycle slump into the Great Depression—and then aggravating it for years.

Nevada is not Depression-proof. Yet the only question about higher Silver State taxes is how much damage they will do to our economy—increasingly wobbly under the combined effects of 9-11 and 20 months of slow-motion stock market crash.

Nevada voters are wise enough to know that Hoover-nomics is not the economics for modern Nevada. Are state legislators as wise?

Steven B.  Miller is policy director for the Nevada Policy Research Institute.

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