Governor’s proposed tax hike is unnecessary

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Both the state’s newly elected Republican controller and treasurer have come out against Republican Gov. Brian Sandoval’s plan to raise taxes by $1.3 billion over the next two years, primarily to fund education.

State Controller Ron Knecht in what he is calling his first monthly report flatly states that the contention that tax revenue is not keeping up with the state’s needs is simply wrong. “In the last ten years alone, state spending has grown 10 percent more than Nevadans’ incomes,” he writes, “proving that the problem is spending, not revenues. By slowing economic growth, excess spending has reduced incomes from what they would have been with better public policy, and it will continue to do so until we rein it in. If new spending is needed, it should be financed by cutting less meritorious spending, not by tax increases.”

Knecht dug into the state’s finances and discovered that, relative to the Nevadans’ incomes, spending for Health and Human Services in the state has grown 37 percent and K-12 public education spending has increased 23 percent in the past decade — with no corresponding improvement in student test scores or graduation rates.

He looked into the entire state budget, which is more than $20 billion, not just the general fund and notes that the increased taxpayer burden is not due to inflation or population growth. He also said Nevada’s tax burden now ranks 25th or 26th in the nation, depending on how it is measured.

State Treasurer Dan Schwartz noted that Knecht’s “statistics raise questions both of priorities and ‘value for money.’ The report reminds us that throwing money at a problem will not solve it. Though a common belief in the political world, sadly, that is rarely the case in the real world.”

The words of both the controller and the treasurer echo those of French economist Frederic Bastiat who pointed out that government spending simply diverts money that could otherwise have been used in the productive sector.

Knecht put it this way: “If public-sector over-reach had been restrained, we wouldn’t have endured as much slowing of economic growth in recent decades as we have, nor the poorest recovery since the Great Depression during this last six years. So, aggregate incomes and human well-being would be significantly higher than they are today. As long as government excess continues, we will fall further and further behind where we should be, regardless of what feel-good public programs we add and expand. The damage to economic growth caused by the continuing and growing excesses of government taxing, spending and regulation overwhelms any good that such new spending and programs can do. Hence, people who understand how the world works and care about our children’s futures want to restrain the growth of government.”

Schwartz even suggested one place where the budget could be cut, something Sandoval never touched on in his State of the State speech where he outlined his tax hikes. Schwartz estimated $50 million could be saved by cutting the expenses of the state’s more than 200 boards, agencies, commissions and other non-essential legacies.

For his part, Knecht suggested eliminating collective bargaining for local government public employees and repealing the prevailing-wage law that increases the cost of public projects by as much as 20 percent.

Both attacked the governor’s plan for a graduated business license fee based on gross receipts, a plan that is the same as, though smaller than, the gross receipts tax the voters rejected in November by a vote of four to one with the governor himself in vocal opposition.

In an email Knecht said, “The governor’s business margins tax should be rejected.  It’s unnecessary and one of the most destructive tax proposals seen in quite a while.  I also think the sunset taxes should … sunset.”

Both Knecht and Schwartz had the temerity to suggest that perhaps the taxes on the tourist driven gaming industry — “the lowest among major gaming venues,” as Knecht noted — could be raised.

Nevadans spoke loud and clear in saying “no” to a gross receipts tax. Even the governor opposed the idea only 120 days ago. Now he proposes it in his budget? That makes no sense to us.

We like Gov. Sandoval in a lot of ways. But he’s going to have to explain his thinking more convincingly than he has so far. — TM

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