Horsford: MBT 'hampers job creation' ... let's double it!
As the details of the Democrats' $1.2 billion tax package, which would be the largest tax increase in Nevada's history, are introduced as part of SB491, it's worth remembering what Senate Majority Leader Steven Horsford wrote in the Las Vegas Sun on Sunday about the Modified Business Tax.
For example, the current modified business tax hurts small business and hampers job creation.As NPRI has been pointing out for years, Horsford's exactly right here. The MBT hampers job creation and, as such, increasing the MBT will lead to fewer jobs.
Unfortunately for individuals in Nevada, which currently has the highest unemployment rate in the nation, Horsford also wants to double the job-hampering MBT. Under current law, the MBT rate will decrease from 1.17 percent to .63 percent when the 2009 tax hikes sunset at the end of June.
Part of Horsford's plan to raise taxes by $1.2 billion is to permanently extend the 2009 tax increases. Now, Horsford and company do want to eventually replace the MBT with a "margins" tax - which is one of the most economically destructive tax instruments available to lawmakers - but the margins tax wouldn't kick in until 2012.
This means that in the short term, Horsford wants to double a tax he admits "hampers job creation."
Read moreHorsford: MBT 'hampers job creation' ... let's double it!
As the details of the Democrats' $1.2 billion tax package, which would be the largest tax increase in Nevada's history, are introduced as part of SB491, it's worth remembering what Senate Majority Leader Steven Horsford wrote in the Las Vegas Sun on Sunday about the Modified Business Tax.
For example, the current modified business tax hurts small business and hampers job creation.As NPRI has been pointing out for years, Horsford's exactly right here. The MBT hampers job creation and, as such, increasing the MBT will lead to fewer jobs.
Unfortunately for individuals in Nevada, which currently has the highest unemployment rate in the nation, Horsford also wants to double the job-hampering MBT. Under current law, the MBT rate will decrease from 1.17 percent to .63 percent when the 2009 tax hikes sunset at the end of June.
Part of Horsford's plan to raise taxes by $1.2 billion is to permanently extend the 2009 tax increases. Now, Horsford and company do want to eventually replace the MBT with a "margins" tax - which is one of the most economically destructive tax instruments available to lawmakers - but the margins tax wouldn't kick in until 2012.
This means that in the short term, Horsford wants to double a tax he admits "hampers job creation."
Why is the NSEA afraid of Mike Chamberlain?
Saturday I [Michael Chamberlain] was kicked out of the Nevada State Education Association, the state teachers union, convention for, well, for being a conservative at the NSEA convention. Not only did they kick me out of their meeting but, later, one of the directors called me and the others who attended as guests of one of the delegates "enemies" of the organization.Read the whole story, including Mike's new label that I'm quite jealous of, at Cranky Hermit.
One of the people who escorted me out of the meeting is a former Executive Director of the ACLU of Nevada, to boot! How's that First Amendment working for you?
Camped-out leftist protestors highlight differences between takers and makers
A few leftists in Nevada are currently camping out on the lawn of the Capitol to try and generate support for the Democrats' job-killing, $1.2 billion tax hike, which would be the largest tax hike in Nevada's history.
Has the contrast between liberals and believers in limited, accountable government ever been clearer?
While leftists, mostly students and liberal activists from what I gathered on Twitter, have enough free time to literally camp out in an attempt to demand more money from other people, conservatives and libertarians are out working and attempting to better their own situations. What business owner, aside from those dependent of government contracts or favors, could afford to take three working days off and do nothing?
The problem with taking money from the productive members of society and giving their wealth to others is that the government is incentivizing everyone, especially entrepreneurs in society, to stop producing and just take the government's money. Government, though, doesn't create wealth and only has money because it takes it from the people who are working. What happens when the takers outnumber the producers? I hope we don't find out.
The legislative campout offers legislators a clear choice: Are you going to support taking money from the "silent majority" - the overwhelming majority of Nevadans who are working to improve themselves without taxpayer dollars - and give it to individuals - most of whom already receive some form of government subsidy - who already have enough free time to spend three days camping out?
The dichotomy between the makers and takers has rarely been clearer.
Sandoval vetoes Dems' reapportionment plan
On Saturday, Governor Brian Sandoval officially vetoed legislative Democrats' redistricting plan, as embodied in SB 497. The veto message was just read on the Senate floor this morning. Here is the key passage:
This bill relates to the revision of legislative and Congressional districts in our state. In my State of the State address, I said that legislative and Congressional districts should be drawn for a fair representation of all constituents-and that they be consistent with the law. This bill fails to meet both standards.
In 1965, Congress passed the Voting Rights Act ("the Act"). The Act prohibits states from using the redistricting process to dilute the voting strength of minority communities. In doing so, the Act ensures, consistent with my call at the State of the State, that lines of representation be drawn to afford minority communities equal opportunity to elect representatives of their choice. The central mechanisms by which the Act ensures such outcomes are simple: no fracturing and no packing of such communities.
The redistricting plan reflected in this bill does not comply with the Act. In the last ten years, the Hispanic community in our state has grown significantly. Indeed, recent Census figures reveal that one in four Nevadans are of Hispanic decent. The law and common sense-requires that we recognize this fact and afford Hispanics an equal opportunity to elect representatives of their choosing.
For NPRI's coverage of the redistricting debate, see Kyle Gillis's investigative reporting on the topic.
Hayek on group interests
While reading Hayek's famed "Choice in Currency" essay this weekend, I stumbled across a passage that was, to me, particularly insightful. Hayek discusses the negative impact that group interests play within democratic governance. Spending my time at the Nevada Legislature, I see this play out every day just as Hayek notes:
I must confess that in the course of a long life my opinion of governments has steadily worsened: the more intelligently they try to act (as distinguished from simply following an established rule ), the more harm they seem to do-because once they are known to aim at particular goals (rather than merely maintaining a self correcting spontaneous order) the less they can avoid serving sectional interests. And the demands of all organised group interests are almost invariably harmful-except only when they protest against restrictions imposed upon them for the benefit of other group interests. I am by no means re-assured by the fact that, at least in some countries, the civil servants who run affairs are mostly intelligent, well-meaning, and honest men. The point is that, if governments are to remain in office in the prevailing political order, they have no choice but to use their powers for the benefit of particular groups.
The problem with all the current arena/stadium proposals
There are currently three proposals floating around the Nevada Legislature to build a new stadium or arena in Las Vegas. Backers of the proposals claim a new facility could be used to lure a professional sports team to Las Vegas.
Caesars Entertainment has proposed a 20,000-seat arena behind the Imperial Palace. That proposal is going to the voters, because the Legislature voted it down earlier in the session.
Texan businessman Chris Milam has bought the Las Vegas 51s and is proposing to build a ballpark, a stadium and an arena across the I-15 from Mandalay Bay.
And UNLV now has a proposal, with a lobbying team that includes former Republican governor Bob List, to build a 40,000-seat stadium by UNLV.
Now, these proposals differ in locations, primary backer, the size of the facility and whether the new building would be a stadium or an arena. But they all have one problem in common.
Each of them wants the Legislature to authorize taxpayer financing for at least a portion of the project.
Leaving aside the inherent problem of government giving your money to a private business, this is a perfect example of why government shouldn't pick the winners and losers in the economy.
Instead of pitching the merits of their plans to investors, these developers are going to politicians. Let's compare how the two processes work.
Investors, because they are spending their own money, have a strong incentive to examine whether a project makes financial sense and would bring the best return on their dollars. This process unfolds millions of times every year and is one of the most important - and powerful - features of the free market. Occurring spontaneously among individuals, this process usually prevents poor uses of scarce resources and directs those same resources into the areas individual consumers want the most. Now, this process will produce some failures, but the financial impact of those failures is limited to those who chose to spend their money on it.
Politicians, on the other hand, are spending other people's money - yours and mine. This makes it more likely that a shoddy project will get pushed forward, because, instead of examining whether a project makes financial sense, many politicians (excluding those committed to free-market principles or who have a working knowledge of Nevada's constitution) examine whether a project makes political sense. Those factors include good short-term PR, campaign contributions, quid pro quos with lobbyists or other lawmakers, and getting re-elected.
If a project goes bad, there are very few consequences for individual politicians - they aren't held financially liable and they are regularly able to move on to higher office. And often times they are no longer even in politics when the destruction their decision caused becomes apparent several years down the road. As a result of all of these factors, the politicians make "investments" that private investors would reject as a financial loser. Even if some consider a particular project a "success," you still have the constitutional, economic and philosophical problems of forcing taxpayers to subsidize someone else's business.
Instead of turning to the Legislature and demanding taxpayer dollars to subsidize their businesses, developers interested in building a stadium or arena in Las Vegas should put their (own) money where their mouths are.
Horsford: MBT 'hampers job creation' ... let's double it!
As the details of the Democrats' tax package, which would be the largest tax increase in Nevada's history, are introduced as part of SB491, it's worth remembering what Senate Majority Leader Steven Horsford wrote in the Las Vegas Sun on Sunday about the Modified Business Tax.
For example, the current modified business tax hurts small business and hampers job creation.As NPRI has been pointing out for years, Horsford's exactly right here. The MBT hampers job creation and, as such, increasing the MBT would lead to fewer jobs.
Unfortunately for individuals in Nevada, which currently has the highest unemployment rate in the nation, Horsford also wants to double the job-hampering MBT. Under current law, the MBT rate will decrease from 1.17 percent to .63 percent when the 2009 tax hikes sunset at the end of June.
Part of Horsford's plan to raise taxes by $1.2 billion is to permanently extend the 2009 tax increases. Now, Horsford and company do want to eventually replace the MBT with a "margins" tax - which is one of the most economically destructive tax instruments available to lawmakers - but the margins tax wouldn't kick in until 2012.
This means that in the short term, Horsford wants to double a tax he admits "hampers job creation."
The structural problems with a margins tax
When it comes to the tax debate in Nevada, there are two questions to consider.
Second, how many tax dollars should the state collect?
For the purposes of this discussion, let's leave aside the second question. This post isn't about if Nevada needs more to take more tax dollars or not. It's about if a margins tax, one of the new taxes Democrats have proposed and also called a gross receipts tax or franchise tax, is a good type of tax instrument to have.
The margin tax that's being proposed would be a .8 percent tax on a company's revenue after a $1 million exemption. The tax would be imposed on a company and applied to the lesser amount of the following:
- 70% of total revenue
- Total revenue less wages and salaries paid
- Total revenue less cost of goods sold
1. A margins tax is nearly as volatile as a corporate income tax, because the additional financial burden imposed on firms would accelerate business closures. Thus, not only would the state be unable to collect revenue, but the uniquely perverse distortions caused by a margins tax would generate significantly higher unemployment.
The higher tax rates that would be assessed against more complex goods would also distort consumer behavior away from optimal consumption patterns by introducing artificially increasing the cost of more complex goods.
3. A margins tax will burden businesses with new accounting measures that will increase compliance costs.
4. A margins tax favors vertical mergers. Because businesses wouldn't pay a tax on supplies it "sold" to itself, a margins tax would accelerate vertical mergers as firms seek to reduce the amount of taxes paid.
While no tax instrument is perfect, there are inherent structural problems with any margins tax.
There is no sensible case for gross receipts taxation. The old turnover taxes - typically adopted as desperation measures in fiscal crisis - were replaced with taxes that created fewer economic problems. They do not belong in any program of tax reform.
It's alive!
As you may have noticed, Blogger (the platform Write on Nevada uses) has been down for the better part of the last 48 hours, and Write on Nevada hasn't been loading. Today Blogger seems to be working, so I'm hoping we won't have any more technical problems going forward.
My posts from earlier this week seem to have disappearred, so I'll be reposting those soon. With the legislature talking taxes, education and collective bargaining reform, there's tons to talk about, so check back often and share your thoughts in the comments.
