Reminder: Income taxes are less stable than sales taxes

Victor Joecks

California taxes have broken the bank. Is Nevada next?
Throughout the past legislative session, legislative leaders talked about how Nevada “needed” to broaden its tax base in order to avoid wild swings in tax-revenue collections.

As California nears a compromise to pass its state budget, it’s worth remembering how unstable income taxes can be.

Personal income fell this year in California for the first time in 70 years, leading to a 34 percent plunge in income tax revenue during the first half of the year.

In comparison, sales-tax collections in Nevada have only fallen by 11 percent in fiscal year 2009.

Statewide taxable sales for April 2009 of $3,217,547,531 represents a 17.9% decrease over April 2008, and an 11.0% decrease for the ten months of fiscal year 2009.

With the Sun reporting yesterday that demands for government services have increased faster than expected, the governor may have to call a special session of the Legislature to close a new budget gap.

If that happens, the advocates for increasing taxes will be using the rhetoric of “broadening the tax base” to try to justify the government taking more of your money.

California’s recent experience, though, exposes the inaccuracy of the tax-stability justification for enacting a new type of tax.