Nevada Democrats still can’t figure out that it’s a spending problem, not a revenue problem. And they want you to pay…
There used to be a sign at Nevada’s border that read: “No income tax, no sales tax, no inheritance tax, no corporation tax, no gift tax – A Debt-Free state welcomes you.”
Sounds good, right? Apparently not to Nevada’s legislative Democrats, who on May 5 introduced a proposal for the largest tax increase on Nevada citizens in history. It looks like they’re doing their best to take us as far as they can in the opposite direction.
LARGEST TAX INCREASE IN NEVADA HISTORY…SO FAR…
Their proposal is to take $1.2 Billion out of a struggling Nevada economy and give it to the state. That way government can continue to grow in defiance of economic conditions while Nevada citizens continue to cut back on their own budgets.
The first part of the plan is to implement a tax on services, supposedly to be partially offset by a reduction in existing sales taxes. The net increase from this proposal is expected to be $300 Million. The second part of the plan is implement a “margin tax” on Nevada businesses, to be partially offset by the phasing out of the Modified Business Tax. Democrats claim this would raise a net $315 Million. They also propose to raise an additional $626 Million by continuing the temporary increase in the Modified Business Tax as well as the Local School Support Tax, both of which were scheduled to expire June 30 of this year.
The true amount of the increase is unknown, of course. The enabling legislation for these tax increases does not yet reference reductions in sales tax or the phasing out of the Modified Business Tax. Even if these are added by amendment before the bills are voted on, there’s no way to know if these taxes ever will be phased out or reduced, particularly considering that the tax increases are part of a package that repeals the scheduled ending of two existing taxes. Rarely does government ever give back money once it’s coming in. If history and current events are any guide, tax reductions scheduled by this legislature can easily be repealed by the next one.
Big government legislators argue that imaginary spending reductions in recent years have cut state services to the bone, and that the cuts the governor is recommending for 2012/2013 will result in major hardships for vulnerable citizens and gut education spending in the state. To set the stage for their tax increases, they’ve spent most of the session setting up committee “hearings” and public town halls, then packing the house with students and educators complaining that they can’t survive yet another massive budget cut on top of the imaginary cuts that they claim to have already suffered. Unfortunately for their case, the facts tell a very different story.
OVERALL GENERAL FUND SPENDING:
In the 2009 legislative session, a budget for the 2009-2011 biennium was approved for a little under $6.6 Billion. This was the first time state spending had been cut in many years, and it represented a real cut in spending of 3.73% compared to the prior biennium. It was a drop in the bucket, however, compared to the increases in state spending for the three biennia prior to 2009-2011. Those increases ranged from 17% to over 27%, so even after reducing spending for 2009-2011 the state budget was 72% higher than it was back in the 2001-2003 biennium. The US Census Bureau estimates that Nevada’s population grew 35.1% over the period from 2000 to 2010, which means that during the last ten years Nevada’s general fund has grown approximately twice as fast as our population.
But this first ever “draconian” cut in spending wasn’t the end of the story for 2009-2011. During the 2009 special session, an additional 5.14% cut in spending was approved. This still left the final 2009-2011 budget higher by 7% than the budget from 2005-2007, and 64% higher than the 2001-2003 budget. If you’re keeping score, you’ll notice that 64% still handily outpaced our 35% population growth.
WHERE ARE THESE HUGE CUTS WE KEEP HEARING ABOUT?
The numbers prove the state has only recently made minor cuts after years of runaway spending, so how can legislative Democrats maintain that spending has been cut so drastically? It’s Big Government math: they don’t compare spending from one year to the next; they compare approved spending to government’s wish list, and any reductions from this wish list are counted as spending cuts.
So, for example, Nevada spent around $6.3 Billion in the 2009-2011 biennium. When the various government agencies put together their dream budgets for 2011-2013, their requests added up to $8.3 Billion. Governor Sandoval originally proposed a budget of $5.8 Billion, or about 8% below what we actually spent in 2009-2011. Democrats, however, saw the $5.8 Billion as being $2.5 billion below the wish list, and accused the Governor of wanting to cut spending by 30%.
The proposed $1.2 Billion in new taxes combined with $300 Million in additional funding that the Governor’s found from existing sources will let Nevada government can grow to a record high spending level of $7.8 Billion for 2011-2013. By comparing this to the fantasy budget requests of $8.3 Billion, Democrats claim that this is a cut in spending, when it’s really a 24% increase over 2009-2011.
The legislative Democrats put together a presentation explaining why we need to give so much more of our hard earned money to the state. It starts out by referencing the fact that Nevada supposedly has a 54% budget deficit for the coming biennium, the highest deficit of any state in America. The source for this tidbit is a liberal think tank called the “Center for Budget and Policy Priorities”. On this page they state clearly that they based their misleading 54% number on state agency requests rather than on any actual budget.
BUT WHAT ABOUT THE KIDS? WE CAN’T GUT EDUCATION!
There’s been no shortage of people shouting in the streets about how Nevada is gutting education. Once again, the facts prove that this is simply not true. Nevada’s education spending is public record. According to the Dept of Education’s own figures education funding for K-12 grew every single year from 2006 through 2010, and it wasn’t until 2011 that the school budget called for a first ever reduction of 4.1%. In 2006, K-12 total resources were $2.7 Billion, and by 2010 total resources had grown to $3.3 Billion. Over the same period, per-pupil spending grew from $6,488 to $7,893 and the average teacher salary grew from $45,439 to $53,281, plus benefits.
The figures above are totals for all K-12 education spending from all sources. The legislative counsel bureau reports the state’s support of K-12 education was $600 Million in fiscal year 2001/2002. In the 2009 special session, the legislature approved twice that amount, or $1.2 Billion, for fiscal year 2010/2011. The state’s support of K-12 education as a percentage of general fund spending grew from 33.1% in 2001 to 39.2% in 2011. Nevada’s legislatures and governors have been consistently strong supporters of education, not only providing more revenue for schools every year, but also increasing their share of scarce revenues in the 2009 legislative session to protect schools from the cuts that other state departments had to suffer.
So if the problem isn’t in the amount of money coming in, the inescapable conclusion is that the money collected is simply being spent badly. And in that situation, providing even more money isn’t going to fix the problem. The solution is in the reforms proposed by Governor Sandoval in his education reform bills AB554 (school grading and parent choice), AB555 (ending last in/first out teacher layoffs and addressing tenure and performance), AB557 (performance pay for teachers) and AB558 (block grants and administrative reforms). Consistently increasing education spending has not improved our education system; a slight reduction in revenue will not destroy it.
SO WHAT’S THE REAL STORY?
The facts are that Nevada’s government grew out of control during the housing bubble of 2004-2007. Property values were up, business was great, and government was growing. Everyone was optimistic, and Nevadans were spending more money than ever. When the housing bubble burst in 2008, individuals and businesses that had overextended themselves felt the pain, and cut back, sometimes severely, in their budgets to adjust to their lower incomes. Figures compiled by former Assemblymen Ron Knecht and Lynn Hettrick show that from 2008 to 2010 overall state spending grew at an average annual rate of 4.66%, driven by average annual increases of 5.86% in Human Services and 3.98% in K-12 education. Over that same period, annual household income in Nevada declined by an average of 3.11% per year.
Knecht and Hettrick further point out that over the past three years, the private sector has lost one out of six jobs that existed before the recession started. By comparison, the number of state employees has only declined 2.5% from its maximum level.
A tip of the hat to the Cranky Hermit blog. He used a chart from the Democrat’s own presentation in support of higher taxes to show the two choices facing the state. The Governor’s budget proposes spending in line with the overall trend of increased government spending since 1991. The proposal to add $1.2 Billion to the amounts for the next biennium will keep total spending well above the trend.
THE GOOD NEWS…
…is that we elected more conservatives to the state legislature in 2010 than had been elected in a long time. The 2/3 majority of liberal legislators able to easily override the Governor’s veto that existed in the 2009 session was broken, so big government fans can’t count on an easy override of Governor Sandoval’s veto of new taxes in 2011. What that means, however, is that the pressure on the Republican Assembly and Senate caucuses will be intense. Big government fans need two Republican Assemblymen and three Republican Senators to defect in order to pass a tax increase, and they will work every angle to make it happen.
WHAT CAN YOU DO?
1) Express your opinion on tax legislation at the legislative website:
AB569 is the bill to implement a services tax. The Assembly Taxation committee held hearings on AB569 on the 12th, 13th and 14th. Assembly Taxation, like all committees, has a Democrat majority, so we expect this bill to pass out of committee. It will require a 2/3 vote for approval on the floor, however, so it can be stopped there. So far 56 people have commented on this bill; 12 are in favor and 44 are opposed.
SB491 was originally introduced to prevent the sunsetting of the Modified Business tax increase and the Local School Support Tax, in addition to other tax provisions. It now has amendments pending that would add the margin tax to the text. Hearings were held by the Senate Revenue committee on the 12th, 13th and 14th, and two additional hearings are scheduled for Monday the 16th and Wednesday the 18th, both at 11:30 am. This is a lot of hearings in a short time, but the committee chair wants as many people on the record in favor of the bill as possible. This bill should also make it out of committee on a party line vote, but can be stopped on the Senate floor because it requires a 2/3 vote. This bill has 43 comments, 9 in favor and 34 against.
2) Contact your legislators directly by phone or email:
Republican Assembly Caucus:
Republican Senate Caucus:
James Settelmeyer firstname.lastname@example.org
The Governor’s office would also appreciate hearing that they have your support:
Email Governor Brian Sandoval
Remember that these legislators receive sometimes over a hundred emails per day – if you can, keep your message of support short and simple, and reference the bill or subject and whether you support or oppose in the subject line. That will let your representative quickly tally the number of support emails they receive.
3) Write a Letter to the Editor:
Finally, please help spread the word that a majority of Nevada’s citizens voted for fiscal responsibility and living within our means. Pick a couple of facts out of this briefing and write a letter to the editor of your local newspaper, or call a local radio talk show. If you get published or on the air, please drop me an email of when and where so we can keep track.
Thank you for all you do. The big government minority is doing everything possible to make it look like Nevadans want to pay more taxes and continue to grow government. With your help, we can show support for Governor Sandoval’s responsible budget which will allow Nevada’s economy to recover while still taking care of the services that the state should provide for its citizens.
Nevada Republican Study Committee
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