The Presumed Serfdom of Taxpayers

One of the odd things about this year’s debates over Nevada’s state budget has been the peculiar assumption lurking behind almost every official presentation.

It’s the universal supposition that state government is surely entitled to enough new tax revenue to—at the very least—allow it to stay ahead of inflation.

You can see that presumption in the tables of numbers offered the public this year by the Governor’s Task Force on Tax Policy, by the Legislative Counsel Bureau, and by the state government’s budget division. Every time projected state spending or projected state revenues are published, they always appear in a series of years, each of them diligently translated into per-capita and “inflation-adjusted” terms.

What’s odd about this, you ask? Isn’t it essential to know what we’re talking about in terms of real—non-depreciated—dollars?

It is. Nevertheless, there’s a more fundamental reality that always gets left out of this picture. And it’s becoming more important every day.

Implicitly, these analyses always privilege government over the citizen—the agencies over the people they were created to serve. Always the presumption is that, if state bureaucracies and taxpayers alike are under financial pressure from the federal government’s on-going debasement of the currency, any required belt-tightening is entirely the lot of citizens—never state or local government.

Take, for example, the fiscal reports mentioned above. None of them ever even broach the mere possibility that Nevada government might somehow come to at least share a bit of the ongoing burden of the hidden tax that is inflation. Instead, in each case it is presumed that this burden is part of the fate of taxpayers alone. And should Silver State citizens not be able to keep increasing their personal income enough to carry not only their own extra burden of inflation-tax but also the extra chunk of it the state wants to pass along, well … tough: Implicitly it is assumed that state government elites are entitled to take it—regardless of how much popular poverty or personal havoc this may cause.

The paradigm that is operating here is ancient, despotic and quite out of place in a modern market economy. Members of Nevada’s reigning political class—unconsciously, perhaps—see their role as something out of Pharaonic Egypt: one of selecting collective societal tasks for the rest of us to achieve. Citizens are deemed mere means—ciphers with little intrinsic value other than to serve ends selected by the self-anointed elite.

While moral censure is due here, that is not the immediate point. That point, rather, is how primitive, atavistic and ultimately inadequate is this operating paradigm.

Its inadequacy is behind Nevada’s current fiscal woes. Because tax-consuming special interests have been allowed to determine state spending levels, state government ultimately ended up in the fiscal ditch.

Its inadequacy is also behind the current legislative stalemate. Because leaders of both legislative chambers are invested in this authoritarian paradigm, they seek to impose a radical new tax structure on the state despite the lack of a public consensus to support it.

Most importantly, however, this paradigm provides a pitifully inadequate frame of reference for addressing the new set of troubles that are about to arrive on Nevada’s doorstep.

It is increasingly evident that the Silver State—like America generally—is heading into the most economically unforgiving era faced in this country since the Great Depression. Though real savings are the only source of real economic growth, the Fed continues to incessantly attack the savings process with its frequent floods of funny money—with which holders chronically bid valuable resources away from the more efficient uses that otherwise would lead to real wealth creation and real savings.

America thus appears to be once again dancing down the same demented path that produced the prolonged 1930s tragedy and—for the last 12 years—has yielded Japan’s slow-motion depression. Actually, this time it could be even worse: The Fed now believes that the problem in both 1930s-America and Japan was that monetary authorities did not adulterate the currency fast and forcefully enough!

So the prospect is now quite real that, for years ahead, average Nevadans will be facing a tough, hardscrabble economy. Making it even worse, most likely, will be an American currency that depreciates faster than morning dew in midsummer in the Mojave.

In this darker new era, state government’s presumed entitlement to “enough new taxes to stay ahead of inflation,” won’t yield acquiescence.

It will yield violence.

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