The pro-tax lobbyists and legislators in Carson City keep proposing new varieties of tax goulash to pay for the huge increase in state government they hope to inflict upon Nevada citizens. Whether it’s half a billion or a full billion in new taxes, either way it’s huge.
Assembly Majority Leader Barbara Buckley has an affinity for all taxes, but continually touts a bank franchise fee of 5 percent of net profits. She states that banks in neighboring California pay over 11 percent in that state, so demanding 5 percent from Nevada banks, to her, “seems fair.”
With all the taxes that the state of California is collecting, it must really be flush, a picture of economic health, right? Wrong. The Golden State is so broke and dysfunctional that the governor appears likely to be recalled, and the voters may ask The Terminator to take his place.
The State of California’s structural deficit lies somewhere between $20 and $25 billion and “is racing to fiscal chaos,” according to the Los Angeles Times. But it is difficult to know just how bad a condition California’s finances are in. Grant’s Interest Rate Observer describes California’s financial information as “financial poetry.” And David Hitchcock, Standard and Poor’s California analyst, was amazed that the state’s auditor allowed California legislators to book a portion of their spending as an asset.
It is incredible that this kind of financial mess could happen, Grant’s notes, “because California is both affluent and heavily taxed.”
How on earth can a government go broke under these conditions? Affluence and high taxes would seem an unbeatable combination for government. Grant’s notes that “The state that can’t seem to make ends meet has the eighth-highest median household income in the country.”
California’s revenue ballooned in the late nineties, increasing more than 33 percent over the last two years of the decade. The increase was fueled by taxes on capital gains and stock options. Of course, this kind of revenue stream couldn’t last, but California’s legislators couldn’t resist spending the money to increase government “services.”
Since the deflating of the NASDAQ bubble, California’s revenue stream has slowed to a trickle. Nevertheless, the state’s spending charges on and the state is instituting more programs that will stifle economic development. John Moorlach, treasurer and tax collector for Orange County, told Grant’s “that the state is virtually forcing businesses into the arms of neighboring capitalist states through such pioneering public initiatives as the Family Temporary Disability Insurance program, which was signed into law by Davis in September.” FTDI calls for employees to receive partial wage compensation from the state “while caring for family members who are ill, or for bonding with a child new to the family.”
The lesson our legislators should learn from our neighbor’s financial predicament is not, “Hey—taxes and regulation are much worse in California, so we can afford to jack up our taxes!” That would make it only a matter of time before Nevada is in the same kind of mess as California.
The reality is that, no matter how much money taxpayers are forced to hand over to governments, it’s never enough to satisfy the likes of Barbara Buckley—just as it’s never satisfied her friends in the California legislature.
If Nevadans look to the West, they can see the future for the Silver State that the Assembly Majority Leader and others in this state government are trying to bring into being.
This is madness, and now is the time to stop it.
Doug French is executive vice president of a Southern Nevada bank and a policy fellow with the Nevada Policy Research Institute.