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Growth Has More
Than Paid for Itself

by Judy Cresanta

efore 1979, the property tax rate in Nevada’s cities and metropolitan areas was at or near the constitutional limit—$5 per $100 assessed value. But the state legislature that year not only reduced the tax rate to $3.64 per $100, but also established a statutory cap. Extra revenues already in the state general fund were used to offset the reduction. Yet two years later, the tax-rate consequences of runaway national inflation were still hitting Nevada property owners hard. California’s 1978 Proposition 13 tax revolt had been upheld in that state’s supreme court and now a similar taxpayer initiative was gathering momentum in the Silver State.

Proposition 13 had shattered the conventional wisdom that tax relief bills had to be “revenue neutral”—i.e., that the size and scope of government could not be reduced. By providing property tax relief to Californians without increasing other state taxes, Prop 13 had terrified California’s political class. Now Nevada’s looming constitutional amendment spread similar panic in the Silver State establishment.

Rather than face long-term constraints on their freedom to wheel and deal, state legislators moved to take the steam out of Nevada’s Prop 13 campaign. They agreed the property tax would be further cut and remaining state and local revenue needs would be met with a hike in the sales tax. This was the 1981 “tax shift.” By 1982, property tax rates in Las Vegas had dropped to $2.20, in Reno they had dropped to $1.71, and in Carson City they were down to $1.07.

Today, of course, the so-called “tax shift” has turned out to be a long-term “tax shaft.” Not only are property tax rates in most areas of the state now right back up again near the statutory limit, but sales tax rates have kept going up. Nevada’s rates, according to the latest interstate comparison from the U.S. Dept. of Commerce, are now the third-highest in the country. And today the Nevada interest groups that live off the taxes levied on their fellow citizens are plumping for even higher taxes.

These special interests are politically powerful and currently have enough of a lock on Nevada state government to block any fundamental taxpayer-friendly reform. For example, should a new department administrator in Carson City try to economize by reducing unneeded staff, he’ll get calls from members of the legislature, upset that he’s not respecting what they believe to be their patronage perks. Similarly, abuses, waste and egregious misconduct in Nevada state government are routinely shielded by state legislators who refuse to pass any sunshine laws to let the public or the media find out who the chronic offenders are. Such abuse of the public trust gets classified as a “personnel matter.”

It’s a vicious circle: With the public kept in the dark, Nevada’s legislators need only keep happy the active special interests—in the above case, the state employee union. But as long as that special interest is served, what goes on in Nevada state government remains concealed from voters. Thus Nevada gets a system where would-be legislators come to essentially represent not average voters and taxpayers, but the special interests who organize to get their collective siphon tubes into the public treasury.

Given this degeneration in democratic process, it’s not surprising that though state revenues rose tremendously after 1981, state spending exploded even more. The Nevada Taxpayers Association (NTA) was pointing out that the state needed to take advantage of the new revenues to prepare for the future needs, but legislators were deaf to the warnings.

In 1983 the association asked that surplus revenue be set aside in capital facility and stabilization funds. The idea was to fund growth and at the same time provide for future economic slowdowns. But not before 1995 did legislators allow local governments to set up such trust funds.

Similarly, successful mega-resorts, planned communities and years of high-profit mining activity have generated huge increases in sales taxes for state and local governments over the last two decades. But every year, as sales tax revenues exceeded original projections, the surplus was immediately spent by the counties, legislatures and the governors.

A major part of those surpluses went to engorge a union—one which exerts most of its efforts to block education reforms that would help Nevada’s kids compete in the world. A teacher cartel, it masquerades under the name of the Nevada State Education Association. This year—in a world-class demonstration of chutzpa—the NSEA began a campaign for new taxes to be imposed on Nevadans, whining that growth is not paying for itself. But as Carole Villardo of the NTA showed four years ago, whether one uses figures from before or after the Tax Shift as the baseline, the growth in sales and property tax revenues has exceeded Nevada’s growth in population by always hefty margins.

The fact is, Nevada growth has more than paid for itself.

It just doesn’t pay for money-drunk politicians who choose time and again to go out on decades-long feeling-no-pain spending toots. NJ

Judy Cresanta (jc@npri.org) is president of Nevada Policy Research Institute.


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