Who Gets All
That Tax Money?

by Ralph Heller

ore than a few readers were startled to learn from last month’s Nevada Journal that Nevadans are now plagued with the seventh highest "per capita state and local tax burden" to be found among the 50 states.

Nevada Policy Research Institute reported the state-by-state tax burden ranking as calculated by the Tax Foundation in Washington, but in truth government itself had long ago alerted Nevadans to the likelihood of a huge tax burden awaiting us just down the road. Every 10 years the U.S. Department of Commerce calculated state-by-state comparisons, and here’s how Nevada was ranked among the 50 states by the Commerce Department just a decade ago:

• 1989—Nevada ranked 16th highest

• 1990—Nevada ranked 13th highest

And then a year later, in 1991, Governor Bob Miller announced that his proposed budget for the 1991/92 Fiscal Year would be "only" $300 per capita more than a year before. Lucky us. Meanwhile, those state-by-state rankings from the Commerce Department were cited in a 1991 UNR study but our state’s newspaper editors simply yawned and never reported the startling truth.

One hopes that the Department of Commerce will publish updated statistical comparisons again as the present decade comes to a close, but in the meantime taxpayers have to rely for such comparative information on such organizations as the Tax Foundation—and on organizations like our own NPRI, the publisher of this magazine.

Curiously, even as Nevada’s unusually high and regressive tax structure become more and more apparent to previously unwary taxpayers, neither the press nor government itself began asking exactly what the factors might be that contribute to such inordinately high taxes and fees. Instead, editors from one end of the state to the other seized upon a convenient (and trendy) answer: growth.

The Phony Explanation for High Taxes

State legislators and journalists alike became convinced that rapid population growth had necessitated rapidly rising taxes in Nevada, and yet had any of them stopped pontificating long enough to undertake a bit of elementary research they would have discovered that rapid growth in a state with high excise and consumption taxes generates almost unimaginable tax revenues.

Legislators and editors might have checked out the comparative figures for the previous decade, 1980 to 1990. Here’s what they would have learned about population growth and tax revenue growth in Nevada, with the population statistics coming from the U.S. Census Bureau and the tax statistics coming from the Rockefeller Institute at the State University of New York:

• Nevada population, 1980 to 1990… . .up 50.1 percent

• Nevada tax revenue, 1980 to 1990 … up190.1 percent

Probably you should whisper the following to the newspapers in Las Vegas and Reno and to researchers at UNR and UNLV to avoid alarming them: In states with high sales, excise and other consumption taxes and fees—i.e., in states like Nevada—growth always pays for itself, indeed, more than pays for itself. During that decade from 1980 to 1990, only three states enjoyed tax revenue going up even more than Nevada’s 190 percent (with revenue in the state with the fastest rising tax revenue going up 204 percent).

This is not true however, in states that rely most heavily on income and property taxes. In such states—Oregon, for example—tax revenue will sometimes lag slightly behind population growth.

In an attempt to nail this down once and for all, one of the first comparative studies undertaken a few years ago at NPRI compared growth figures for the 11-year period between Fiscal Year 1981/82 and Fiscal Year 1992/93, with all the following figures coming straight from the U.S. Department of Commerce:

• Nevada 11-year population growth. . . . .up 59 percent

• Change in Consumer Price Index . . . . .. .up 40 percent

• Nevada state revenue growth . . . . . . . . up 223 percent

The truth is that most of the 50 states have been awash in cash in recent years which is why no fewer than 31 states recently reduced taxes. As NPRI President Judy Cresanta has pointed out in a recent report, state spending on welfare and Medicaid was lower than expected last year as more than a million people left the welfare roles. But Nevada ranked dead last among the 50 states when it came to case load decreases.

Obviously Some People Are Making Out Like Bandits

Nevada actually was showing a budget surplus of $300 million at the beginning of the 1997 legislative session and to nobody’s surprise most of it ended up committed to several new entitlement programs, but such programs are only a part of the story behind the substantial government budget increases of recent years. There are whole areas of government spending rarely investigated and reported to taxpayers at all, and one of them is the rapid increase in government salaries.

Traditionally government employees had received wages slightly below private sector wages but in return they had enjoyed fringe and retirement benefits most Americans could only dream of.

Yet after World War II this situation began to change radically, and a comparison of government and private sector wage increases in the decade of 1980 to 1990 reflected what was happening. Compiled by the Bureau of Labor Statistics, the comparative figures have been adjusted for inflation:

• Private sector employees, 1980 to 1990…up 3.3 percent

• Federal civilian employees, 1980 to 1990 …up 11.1 percent

• State and local government employees, 1980 to 1990…up 16.0 percent

Shortly thereafter the Rockefeller Institute released 11-year comparisons for the period 1980 to 1991, for all states, but the Rockefeller Study did not try to adjust figures for inflation and took a look for the first time at how local and county government salaries stacked up against state government salaries:

• Private sector employees, 1980 to 1991 … up 53.6 percent

• Nevada state employees, 1980 to 1991 … up 57.5 percent

• Nevada city and county employees, 1980 to 1991 … up 82.3 percent

Now you know why officials in places like Las Vegas and Reno no longer tell taxpayers exactly what they’re paying their city employees—the real figures, as reflected on W-2 forms, not "salary ranges."

By 1995 NPRI was able to publish some eye-opening rankings calculated a year or two earlier by the Bureau of Labor Statistics and the National Education Association, to show just where Nevada public salaries stood when compared to public salaries in other states:

• Nevada private sector employees… . . 22nd highest

• Nevada state employees… . . . . . ... .. . .17th highest

• Nevada public school teachers… . . . . .12th highest

• Nevada city and county employees… ..8th highest

The Nevada teachers’ ranking come straight from the NEA, much to the discomfort of our own NSEA, and the other three rankings came from the U.S. Department of Labor and its Bureau of Labor Statistics.

And Today?

The end of this century and the beginning of another will inevitably generate a floodtide of comparative statistical data from countless government, institutional and other sources and NPRI will be here to bring it all to you. But in the meantime a savvy and imaginative Las Vegas businessman, Knight Allen, has painstakingly found some comparative wage and salary information in a state report, information the Carson City publishers of the report would probably have preferred Mr. Knight not to have figured out and reported.

The report, "Nevada OES-1996," is published by the Nevada Department of Employment, Training and Rehabilitation and is an hourly wage report. But the most recent edition of the report has been published in a new format mandated by Congress.

"In the report," says Mr. Allen, "there are 127 job titles eligible for comparison." To be "eligible," he explains, the computer "occupation code" (job description) must be the same for jobs in the private sector, state government and local government.

Of the 127 job titles that could be compared, here is what Mr. Allen found:

• 65 percent of private sector job titles have a lower wage than the same position in state government

• 80 percent of private sector job titles have a lower wage than the same position in local government

• The "spread" between private sector and state government jobs is 26 percent

• The "spread" between private sector and local government jobs is 28 percent

Reasons for the differences are many, of course, but the most obvious one, as Mr. Knight points out, is that the private sector’s compensation system is based on productivity and a competitive marketplace, while government wages have mostly to do with politics.

What taxpayers can clearly see in comparison after comparison over a decade or more is that government—perhaps especially in high tax states like Nevada—has less and less to do with the welfare of taxpayers and more and more to do with satisfying the financial demands of our bureaucracy.

To which should be added the discomforting observation that the daily press, which we should be able to count on for such information, clearly represents government, not you, which explains the unsettling lack of accountability to which all taxpayers and citizens are entitled. Is there really any information in this article you would prefer not to have had reported to you? But now at least you know who gets most of your tax money. u

Ralph Heller is Senior Consulting Editor of Nevada Journal.


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