Boilerplate for Bigger Tax Burdens

When voters in Nevada’s two most populous counties went to vote last November, they found themselves on the receiving end of what is virtually now a boilerplate pitch for ever-higher Silver State sales taxes.

“Don’t worry about these higher sales taxes on you that we’re seeking,” goes the pitch, in so many words. “Tourists are going to pay a lot (or even most) of these taxes—not you.”

In Washoe County, it was Advisory ballot Question 2, put on the ballot by county commissioners. If passed, the measure would have given commissioners political cover while they lobbied the 2005 Nevada Legislature for a 1/8 of a cent increase in county sales taxes.

Washoe officials proposed raising the total sales tax levied in their County to 7.5 percent. But not to worry, said their official Washoe County press release: “Approximately 30% of local sales tax revenues are paid by non-residents.”

More about this allegation later. But just what was it that—in the opinion of county officials—justified tilting the Washoe tax treadmill upward even more?

County staffers recommended seeking the tax increase to raise an additional $7.5 million per year, for 30 years, to pay for more “open space” — parks, trails and “historical resources.” This in a state where over 75 percent of the land is already controlled by the U.S. Forest Service, the Department of Interior and the U.S. Fish and Wildlife Service. Moreover, Washoe County voters had already approved bonds for open space acquisition four years ago, while state voters had done the same two years ago.

What was so deficient about all of that bond spending—and all the city, county, state and federal taxes already going for “open space”? It was, said a county press release, that “those funds are inadequate for all the open space acquisition priorities identified by local governments….” (Emphasis added.)

Before going to voters, Washoe commissioners had hired a polling firm to test the waters. That firm, Marketec, Inc., reported back that at least 65 percent of their “statistically valid” survey recipients supported the tax increase if it was billed as “open space” acquisition. If the higher taxes were justified as for “quality of life” enhancement, said Marketec, support was at sixty-nine percent.

On November 2, however, the Washoe sales tax increase proposal died a quick death. Only 48.24 percent of voters voted “yes,” while 51.76 percent voted “no.”

In Clark County, voters weighed another advisory question—Question 9. Supporters said that a full half-a-cent sales tax increase over four years is needed to hire additional Metro police officers. Historically, appeals framed as support for the police have been some of the most politically potent, but even this measure barely squeaked by. Only 51.5 percent of Clark County voters approved hiking their sales taxes to 8 percent (an extremely high level virtually never explained to the public).

What both of these ballot advisory outcomes suggest is that Nevada voters increasingly grasp how dubious are the claims that higher sales taxes fall primarily on “tourists.”

The proponents of an 8 percent Clark County sales tax hadn’t been able to resist making that claim. In their ballot statement, they said that “Tourists and businesses, including the construction and gaming industries, [will] pay approximately 60 percent—the majority of the sales taxes collected. The residents of Clark County provide for the approximate balance of 40 percent.”

But as a study released just three days after the fall election pointed out, “One cannot tell the true burden of a tax just by looking at where or on whom it is initially imposed, or at what it is called.”

Instead, says Stephen J. Entin, president and executive director of Washington D.C.’s Institute for Research on the Economics of Taxation, “the true measure of the burden of a tax is the change in people’s economic situations as a result of the tax.”

And by that standard, of course, it’s all of us here in Nevada who will end up paying for those taxes. And bearing the biggest burden of all, proportionately, will be working men and women.

That’s because in the real world, when taxes are imposed, everyone who buys anything adjusts—even if unconsciously. Cumulatively, those adjustments create waves of change coursing through the economy, casting about the most economically vulnerable.

Because sales tax increases here in the Silver State instantly make our goods and services marginally less attractive, they also—incrementally—raise the eventual economic vulnerability of every Nevadan.

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