‘Structurally Unbalanced’: The good and bad of the new Brookings report

Victor Joecks

Yesterday, Brookings Mountain West released a report on Nevada's budget situation. The report, Structurally Unbalanced, analyzed the structural and cyclical deficits of Nevada, California, Arizona and Colorado.

The report deserves and time-premitting will get a full response next week from NPRI, because it will be used to try and justify raising taxes in 2011. While I don't have time for a full rebuttal right now, I wanted to address some of the report's main elements very briefly.

While there are some very good elements in the report (a validation of TABOR in Colorado, calls for a rainy-day fund and greater budget transparency and an acknowledgement of the burden Obamacare will place on Nevada), one of its main contentions – that Nevada needs a gross receipts tax – is a terrible idea.

The Tax Foundation reports, "Gross receipts taxes suffer from severe flaws that are well documented in the economic literature, and rank among the most economically harmful tax structures available to lawmakers." [Emphasis added]

Additionally, the report's assertion that Nevada's budget can't be balanced with cuts alone is a generally unsupported assumption and ignores the massive increase in inflation-adjusted, per-capita spending that took place in 2005 (p 6) and is a major factor in Nevada's current budget problems.

I was on KNPR yesterday to discuss the report with Matthew Murray, the report's author, Launce Rake, PLAN's communications director, and John Restrepo, a Nevada economist. Needless to say it was an interesting conversation and you can listen to it here (click on the "Download MP3" link underneath the player).

Also, I'm going to be discussing the report tonight on Face to Face with Brookings Mountain West director Dr. Robert Lang, who some may remember chaired the Nevada Vision Stakeholder Group. Be sure to tune in.