One Sound State, Once Again

Executive Summary

Executive Summary 

In the middle of the Great Depression, while other states suffered shortfalls and communities used scrip rather than actual currency, the State of Nevada ran a budget surplus. It lasted into the mid-1940s.

Proud of the Silver State's unique fiscal situation, state and business leaders launched a nationwide promotional campaign intended to attract wealthy investors to the state. The "One Sound State" project advertised Nevada as a state with "no income tax, no inheritance tax, no sales tax, no tax on intangibles, but with a balanced budget and a surplus."

By 1939, the state surplus was so large that the property tax rate — raised by the 1937 legislature — was cut by 20 percent. The San Francisco Chronicle editorialized, "Unbelievable, but it is true. These people just do not belong in the United States."

Today the State of California is again issuing scrip — called "registered warrants" now — and Nevada clearly needs a new model for fiscal rectitude.

The state's current legislative leadership, however — operating as the Interim Finance Committee — has already signaled its intent to ignore the state's need for comprehensive fiscal reform and instead simply pursue a quantum increase in the state tax burden, while billing it as a comprehensive review of the state revenue structure. Like each of its predecessors over the last 20 years, however, this legislature's tax study was structured to ignore genuine fiscal reform issues and instead merely provide cover for lawmakers out to transfer private-sector resources to the powerful, organized, tax-consuming groups that get them elected.

Nevertheless, Nevada seriously needs genuine, revenue-neutral fiscal reforms, and this report seeks to fill that vacuum. It analyzes the actual volatility of Nevada's current taxes — and the taxes lawmakers keep signaling they want. It covers important tax-related issues, such as achieving economic efficiency and tax equity, while reducing compliance costs as well as tax-induced distortions in economic behavior. And it reveals why comprehensive fiscal reforms for Nevada should include:

• Eliminating the modified business tax;
• Eliminating the insurance premium tax;
• Broadening the sales tax base and reducing the statewide sales tax to 3.5 percent;
• Implementing priority-based budgeting; and
• Implementing spending controls that limit state spending growth to the rate of inflation plus population increase.

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Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.