Recently in Nevada Category

Nevada Governor Jim Gibbons broke a 144 year old Nevada record this session by vetoing a total of 31 bills sent to him by the state's legislature. One of those vetoes was of a much needed $781 million revenue raising package that increased the state sales tax, vehicle registration fees, hotel room taxes, and two business taxes and fees. Since Nevada lacks an individual or corporate income tax, the options for progressive tax reform were fairly limited. Legislators should be praised, however, for recognizing that balancing the budget by slashing state services alone would create undue hardship for too many Nevadans. And they deserve even more praise for confidently overriding that veto in less than 24 hours in both the Assembly and the Senate.

The Governor's veto was widely anticipated, given his signing of a ridiculous and short-sighted "no-new-taxes pledge". At the veto ceremony, Governor Gibbons provided onlookers with plenty of rhetoric regarding the "job-killing" and "economy-crushing" attributes inherent to any tax increase. Interestingly, however, some have suggested that the Governor's position may be more political posturing than actual conviction, as he didn't appear to have launched much of a lobbying effort to prevent his veto from being overriden.

The Center on Budget and Policy Priorities recently released a very useful report summarizing tax expenditure reporting practices in the states, as well as methods for improving a typical state's tax expenditure report. For those unfamiliar with the term, a "tax expenditure" is essentially a special tax break designed to encourage a particular activity or reward a particular group of taxpayers. Although tax expenditures can in some cases be an effective means of accomplishing worthwhile goals, they are also frequently enacted only to satisfy a particular political constituency, or to allow policymakers to "take action" on an issue while simultaneously being able to reap the political benefits associated with cutting taxes.

Tax expenditure reports are the primary means by which states (and the federal government) keep track of these provisions. Unfortunately, most if not all of these reports are plagued by a variety of inadequacies, such as failing to consider entire groups of tax expenditures, or not providing frequent and accurate revenue estimates for these often costly provisions. Shockingly, the CBPP found that nine states publish no tax expenditure report at all. Those nine states Alabama, Alaska, Georgia, Indiana, Nevada, New Jersey, New Mexico, South Dakota, and Wyoming, undoubtedly have the most work to do on this issue. All states, however, have substantial room for improvement in their tax expenditure reporting practices.

For a brief overview of tax expenditure reports and the tax expenditure concept more generally, check out this ITEP Policy Brief.

Earlier this month, the Progressive Leadership Alliance of Nevada (PLAN) released a report called Fool's Gold The Silver State's Tax Structure: Inadequate and Inequitable. The report rightly reminds readers that, "Nevada doesn't have a spending problem. It has an income problem. Its tax system is structurally unsound. The foundation of our state is broken and cannot support what our citizens need."

Nevada's unique tax system has no income tax and relies heavily (too heavily) on regressive sales tax revenue. Couple this with an enormous $1.5 billion shortfall and it's clear that policymakers and activists should pay special attention to this report, which proposes a suite of revenue raising options including: a profits based business tax, closing costly deductions, an unearned income tax, and a traditional earned income tax.

As the fiscal contagion spreads among the states, policymakers are clearly casting about for ways to close large and growing budget deficits. In Nevada, Governor Jim Gibbons may be open to tax increases in light of a shortfall that is projected to reach $1.8 billion over the next two and half years, but he has also floated the idea of 'voluntary' payroll reductions of 5 percent. New Hampshire faces an approximately $600 million budget gap over the same period, with lawmakers weighing such options as selling state properties, legalizing gambling, or deferring needed payments to the state pension fund. Florida may have to confront an eye-popping deficit of $6 billion over just 18 months, driving elected officials to think about raiding a variety of trust funds and imposing a 4 percent across-the-board cut in agency budgets.

Of course, these three states have more in common than difficult days ahead. They also share a steadfast refusal to levy a personal income tax. Rather than continue to cast about for half-measures and temporary fixes -- or, worse, policies that would undermine working families' already precarious economic situations -- policymakers in states like Nevada, New Hampshire, Florida, Washington, and Tennessee need to acknowledge the elephant in the room and consider whether the tax policies that brought them to this point are the ones that will carry them to a better future.

Arizona voters wisely rejected Proposition 105, a proposal that would have placed a nearly insurmountable obstacle in the way of Arizona residents seeking to raise their own taxes through the referendum process.

Arkansas voters approved a measure to institute a state lottery. While the state could certainly use the additional revenue, Arkansans should be wary of funding their government through regressive revenue sources such as the lottery.

Maine residents rejected an increase in the alcohol and soda taxes to fund health care. While it's certainly a bad thing that these taxes are regressive (as well as unlikely to exhibit sustainable growth in the coming years), the ludicrousness of the fervent opposition this relatively minor tax created can be read about in this Digest article and this blog post.

Maryland residents also decided to secure additional revenues for their government via expanded gambling, in the form of 15,000 new slot machines. Check out this Digest article to learn about some of the problems with this proposal.

Missouri also attempted to increase its haul from gambling. Increased gambling taxes and the elimination of limitations on the amount of money one is allowed to lose were approved by voters this Tuesday. This Digest article explains how the proposal leaves much to be desired.

Minnesota voters decided to go through with a 3/8ths percent sales tax hike. While the environmental causes to which the funds will be dedicated are undoubtedly worthy, the regressive way in which voters decided to go about funding the projects (through the sales tax) is far from ideal.

Nevada residents voted to amend their constitution to require that all new sales and property tax exemptions be subjected to a benefit-cost analysis, and accompanied by a sunset provision that will force their reexamination in the future. While the proposal sounds good in theory, its requirements are relatively loose in practice. It will be up to Nevadans to carefully watch their representatives to ensure that the spirit of this law is adhered to. Learn more about this proposal here.

The attention paid to Nevada's ballot situation declined dramatically when a Proposition 13-style cap was kicked off the ballot due to election law violations. But voters will face another interesting tax-related proposal in November. Question 3, placed on the ballot by the Nevada legislature, seeks to amend the state's constitution to require that any proposed exemption to property taxes, sales taxes, and use taxes be demonstrated to have some social or economic purpose. Additionally, the proposal seeks to require that all new exemptions also be enacted with an expiration date, or "sunset provision".

The first of these requirements (that a social/economic purpose be demonstrated) will likely change very little in practice. The proposal is sufficiently vague on what constitutes a social/economic interest that the legislature should have no trouble demonstrating such an interest for any exemption it desires to enact.

The second requirement (that all exemptions be written with sunset provisions) may be a bit better in terms of practical effect. Of course, since no limit is placed on when any specific exemption must sunset, the legislature can easily bypass this requirement for all practical purposes by writing the legislation to sunset at some date absurdly far into the future. But the goal is good in concept. By requiring that all exemptions be periodically reexamined (or face expiration), parties receiving benefits through tax exemptions will be treated in a manner more analogous to those who receive government benefits through direct spending. Unlike budgetary outlays, which are usually revisited every year of two, tax exemptions are often tucked into the tax law and forgotten about, only to continue benefiting the parties in perpetuity.

So while Question 3 won't do too much to shake up Nevada tax policy, hopefully it will spark some useful discussion in the state about enacting more meaningful reforms.

The runup to the 2008 elections has given us plenty of reminders of why direct democracy is generally not the best approach to tax reform. In North Dakota, a typo in the language of a proposed tax cut may actually result in a tax increase for some families. In Nevada, the failure of supporters to properly file thousands of signatures in favor of an (ill-conceived) property tax cap resulted in that measure being thrown off the ballot.

But while both of these rather innocent mistakes are undoubtedly serious, neither is as serious as the rampant dishonesty often involved in the signature collection process. In Arizona, for example, a staggering 42% of signatures for a transportation ballot proposal this year were found to be invalid. In North Dakota, though problem wasn't quite as rampant, one signature collector this week was found guilty of faking potentially hundreds of signatures for their regressive income tax cut.

While there may be compelling reasons rooted in democratic theory for allowing citizens to take matters directly into their own hands, it is also important to remember the benefits of representative democracy. A badly written ballot proposal backed by thousands of fraudulent signatures is hardly an improvement over whatever flaws the legislative process may have. The problems with the initiative process illustrate that there are good reasons for having those who we have elected (and whose salaries we pay) writing our laws.

Backers of Anti-Tax Measure Admit It Will Result in Major Cuts in Education

Anti-tax advocates in Nevada once again appear to have failed in their efforts to get a Proposition 13-style property tax cap onto the ballot. This is the third time in four years that the former Assemblywoman pushing the initiative has come up short -- and her group has now started to grasp at some fairly interesting straws in an effort to reverse that trend.

After failing to collect the required number of signatures needed in 2004 and 2006, this time a District Court judge ruled that the signature collectors had failed to comply with election law procedures for some 8,000 of the signatures they collected. After removing these signatures, the initiative is again well short of the number needed.

The backers of the plan have appealed the ruling to the state Supreme Court, though that effort is unlikely to change much since the ballots are already being printed (minus the property tax cap), and insufficient time remains to re-print them. Though the group backing the plan originally planned to appeal the ruling on the grounds that the relevant Nevada election laws are not sufficiently clear, with things appearing so desperate the group is now claiming that the District Judge who invalidated the signatures has a conflict of interest in the case. The conflict? His wife works as a "Reading Program Coordinator" with a Nevada public school system, and, like many in the education field, could lose a portion of her income, or even her job, if this irresponsible proposal is enacted.

In the words of the proposal's supporters: "Since Judge McGee's wife obviously has an... economic interest in the subject matter in controversy (her income), and the Judge knows it, Judge McGee was required to reveal possible or potential conflict of interest".

So who is this judge's wife? She's worked in the Washoe County School District for 27 years. During the first 14 years she taught grades K-2, and for the last 13 she's been a reading coordinator. Unfortunately for the anti-taxers, she's actually been officially retired for 5 years, though she continues to work with the district on a very limited basis. Though they were wrong on the facts, the anti-tax group's implicit admission here that their plan could force valued school employees to be let go is quite revealing.

Of course, such a scenario is not at all far-fetched. Prop 13 in California has had a significant role in the recent budget troubles plaguing that state. If a similar property tax cap were enacted in Nevada without offsetting increases in other taxes, similar budgetary troubles (accompanied by spending cuts in areas such as education) should be expected there as well.

Earlier this week, the Institute on Taxation and Economic Policy (ITEP) released a brief report using IRS data and revealing that the most unequal states in the country also happen to be states that lack the type of progressive tax provisions that could reduce this inequality and raise badly needed revenue. The most unequal states either don't have a personal income tax or have one in need of improvement. Consequently, these states are left with tax systems that, on the whole, are unsustainable, inadequate, and unfair over the long-run.

The IRS data show that, in 2006, ten states -- Wyoming, New York, Nevada, Connecticut, Florida, the District of Columbia, California, Massachusetts, Texas, and Illinois -- have greater concentrations of reported income among their very wealthiest residents than the country as a whole. Yet, the tax systems in these states generally ignore that very important reality. Of those ten states, four lack a broad-based personal income tax and three either impose a single, flat rate personal income tax or have a rate structure that all but functions in that manner. Three do use a graduated rate structure, but of these, two have cut income taxes for their most affluent residents substantially over the past two decades.

Given this mismatch, it should not be too surprising that over half of these states face severe or chronic budget shortfalls. After all, the lack of an income tax, the lack of a graduated rate structure, or moves to make the income tax less progressive all mean that a state's revenue system will not completely reflect the concentration of income among the very wealthy and therefore will not yield as much revenue.

Case in point: New York. As the Fiscal Policy Institute observes, over the last 30 years, the state has reduced its top income tax rate by more than 50 percent. Most recently, in 2005, it allowed to lapse a temporary top rate of 7 percent on taxpayers with incomes above $500,000 per year. Today, the state must confront a budget deficit of more than $6 billion for the coming year and more than $20 billion over the next three. New York residents seem to understand the disconnect between the enormous disparities of wealth in their state -- where the richest 1 percent of taxpayers account for 28.7 percent of reported income -- and the state's fiscal woes. A poll released this week shows that nearly 4 out of 5 people surveyed support increasing the state's income tax for millionaires. Hopefully, Governor David Paterson is listening. As it stands, he'd rather cap property taxes than ensure that millionaires pay taxes in accordance with their inordinate share of New York's economic resources.

There's some good news for state and national advocates fighting against harmful spending limits like the Taxpayer Bill of Rights (TABOR). Recently, a Nevada court ruled that the TABOR-like, Tax and Spending Control (TASC) initiative wouldn't be on the November ballot. The court rejected the initiative because TASC supporters failed to follow specific rules pertaining to the initiative process. Want to know more about the harmful impact of TABOR? Watch this excellent video from the Center on Budget and Policy Priorities.

Kiplinger reports that business are expected "to mount pitched battles to defeat" TABOR-esque spending tax cap initiatives in Maine, Michigan, Montana, Nebraska, Nevada, and Oregon. In fact, there's a concerted effort forming in Oklahoma that is actually being lead by business groups. The Chairman of Tulsa's Chamber of Commerce was even quoted as saying that TABOR would be a "train wreck" for Oklahoma.