Join us as we live blog Monday’s tax study meeting

Victor Joecks

The push to raise taxes in 2011 has already started, and NPRI is going to be there to give you the facts every step of the way.

On Monday, Geoffrey Lawrence and I are going to be live blogging the meeting of the subcommittee that will conduct a review of Nevada’s revenue structure – that’s legislative speak for “subcommittee to try and figure out the best way to raise your taxes.” The meeting starts at 9 a.m., and since it’s a government meeting it could go all day. But we’ll be sticking it out to the very end so you can have real-time analysis of what’s actually happening.

The meeting is also going to be streamed live here. If that link doesn’t work, go the Nevada Legislature’s schedule-of-meetings page and find the subcommittee meeting. Since it’s a committee meeting, it’s also open to the public. The meeting is being held in the Grant Sawyer Building in Las Vegas, but it will also be attended via simultaneous videoconferencing in Carson City and Elko. Go here to find the physical addresses. If you have the time and the patience for committee meetings, you can even give public comment at the end.

In preparation for Monday and the tax study meeting, let’s set the stage for how the tax study will be used to raise your taxes in 2011.

This Ralston headline says it best: The road to any tax increase is paved with tax studies.

Geoff goes into more detail.

The motivations for this highly questionable maneuvering by Interim Finance Committee members becomes clear when one considers the scope of work they would like to see included in the study. This is no simple academic exercise meant to provide suggestions for “stabilizing” tax revenues.

According to the relevant Senate Concurrent Resolution, a central purpose of the proposed study is to “review proposals for broad-based taxes.” There should be little confusion about what “broad-based taxes” are to be considered. Senate Majority Leader Steven Horsford, who is both an influential member of the Interim Finance Committee and an advocate for the interim tax study, sponsored legislation in the same session that would have explicitly required the imposition of a corporate net profits tax. According to the bill’s language:

A corporate net profits tax or any alternative tax, such as a business transaction tax or any other alternative for the generation of revenue should be evaluated for viability and implemented only after determining the manner in which such a tax can be most effectively levied.

The bill further cites the Silver State’s lack of a corporate income tax as a reason to examine that tax specifically.

Thus, any pretense that the purpose of the Interim Finance Committee’s tax study is to address volatility in the state tax structure in order to “stabilize” tax revenues should be dismissed out of hand. Numerous studies have shown the corporate income tax to be the single most volatile revenue source for state governments in the nation. According to the Federal Reserve Bank of Kansas City, the corporate income tax is more than twice as volatile as the general sales tax. This is because corporate profits are extremely sensitive to economic recession.

The overall volatility of a state tax structure is not improved by adding a new tax that is even more volatile than the existing tax base. This is intuitive for anyone who understands averages or has a modicum of common sense.

Suggestions from legislative leadership that Nevada must “broaden and diversify its revenue base” with new tax instruments are – if made in good faith – naïvely assuming that tax revenues operate in the same manner as personal investment portfolios. While returns on personal investments vary depending on the profitability of individual firms, and while personal wealth can be safer in a diversified portfolio of investments, all tax revenues are directly proportional to economic growth rates. Attempting to “diversify” Nevada’s tax structure by creating new tax instruments would be like attempting to mitigate investment risks by doubling down one’s investment in the same, original securities.

Clearly, the purpose of any study to come out of the Interim Finance Committee is simply to provide a flimsy, see-through rationale for yet another Silver State tax grab. That tax grab is being plotted against businesses and Nevadans who are already struggling. And it would inevitably exacerbate the state’s growing unemployment problem – even if it enriches individual legislators and their rent-seeking constituencies.

The price of liberty and lower taxes is eternal vigilance. Join us here on Monday.