Roberson nails it: Spending growth caused current budget problems
There was a lot of great stuff in the papers this weekend, including Sen. Michael Roberson's letter to the editor in the Review-Journal that correctly identifies the cause of our current budget problems.
Back during the 2003-05 biennium, Nevada's general fund spending increased 36 percent thanks to a significant tax hike and an economic bubble. The combination of both events pumped considerable sums of money into the government's coffers. From there, Nevada's spending continued to grow faster than inflation right up until the economic bubble burst.That kind of spending growth was always unsustainable, and now, lawmakers have to deal with the consequences of such reckless government growth.
Even as thousands of Nevadans were laid off and hundreds of millions of dollars in wealth were lost, the Nevada Legislature proceeded to raise taxes again in order to keep the government spending bubble going despite a nationwide economic collapse.
With fewer people, fewer jobs, lower incomes and less wealth in the Silver State today than in the boom years, it should come as no surprise that tax revenues have dropped. We simply cannot afford boom-era government spending in the middle of a prolonged recession.
The solution isn't higher taxes that enable more reckless spending after the economy picks up. The solution is returning spending levels to where they were previously.
Read moreCoolican on teachers: 'Dump the worst'
Knecht: College closures/mergers are not on the table
After the Board of Regents voted 8-5 to take the closure or merging of any colleges off the table, Sen. Steven Horsford ordered Chancellor Dan Klaich to prepare a report that includes closures and/or mergers.
In today's Nevada Appeal, Regent Ron Knecht, who made the original motion to take closures and mergers off the table, has an excellent, excellent response.
After somewhat incomplete budget reduction plans were presented in March, it was clear that the governor's proposed cuts could be better accommodated by reductions at each institution than by cannibalizing any of them. So, at our March meeting, I moved to discontinue consideration of all such options. Some other regents expressly agreed that the destructive options are unnecessary and would be worse than institutional cuts, and the motion passed, 8-5.And why did Horsford want college closures on the table? Politics.
The first concern is that tax-and-spend partisans may want to keep in play the destructive options to pressure the governor and Republican legislators to support increased taxes. The second concern is that our two universities may be promoting these options to mitigate their own cuts, even though budget processes already favor them over the rest of the system.There's a reason NSHE is known for hyperbole. Unfortunately, this time legislative leadership is making them spin tall tales.
Eating the rich will leave you hungry
An absolutely terrific video by Bill Whittle rebuts Michael Moore's claim that America's budget deficit could be solved by taking money from "the rich."
Horsford mulling proposing a gross receipts tax
J. Patrick Coolican of the Las Vegas Sun had a conversation with Senate Majority Leader Steven Horsford this week. During the conversation, Horsford mentioned some of the tax increases he was considering, including a gross receipts tax.
• Expand the sales tax to services, which make up a significant portion of economic activity but go untaxed. The rate could be dropped to make the effect less regressive.While expanding the sales tax in a revenue-neutral manner would echo part of an NPRI recommendation, it's unlikely that Horsford's looking for a revenue-neutral expansion of the sales-tax base.
• Adopt the Texas franchise tax, which is a modified gross receipts tax on business and that allows for some deductions; or the Ohio commercial activity tax, which is a more pure gross receipts tax on business. Veterans of the 2003 tax fight, which went well into the summer and provided no permanent fix, are no doubt groaning. (Nevada is one of a few states in the country without some kind of corporate income or gross receipts tax.)
• Grab more money from local government while giving those entities more autonomy over their own taxes and spending.
It's Horsford's consideration of a gross receipts tax that deserves the most consideration - and condemnation - here. Let's start with the basics: What is a gross receipts tax?
Gross receipts taxes have a simple structure, taxing all business sales with few or no deductions. Because they tax transactions, they are often compared to retail sales taxes. However, they differ in a critical way. While well designed sales taxes apply only to final sales to consumers, gross receipts taxes tax all transactions, including intermediate business-to-business purchases of supplies, raw materials and equipment. As a result, gross receipts taxes create an extra layer of taxation at each stage of production that sales and other taxes do not - something economists call "tax pyramiding."The Tax Foundation has a full explanation of the consequences of "tax pyramiding" and other structural problems with the gross receipts tax here, but this negative consequence is especially worth highlighting, as Nevada's politicians acknowledge the need for private-sector investment and growth.
Competitiveness: A gross receipts tax interferes with the capacity of individuals and businesses to compete with those in other states and other parts of the world. The tax embedded in prices grows as the share of a production chain within the state increases, so there is incentive to purchase business inputs from outside the state. It discourages capital investment by adding to the cost of factories, machinery, and equipment, and the disincentive increases as more of those capital goods are produced in the taxing state. This tax structure does not promote the growth and development of the state.In summary, the economists at the Tax Foundation strongly denounce the gross receipts 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.Previously, Horsford changed his stance on imposing a corporate income tax, from supporting to opposing, because he recognized the inherent instability in the corporate income tax.
A review of the literature and the problems inherent in any gross receipts tax should encourage Horsford to make the same change regarding a gross receipts tax.
Regardless of how many tax dollars you want the state to have, a gross receipts tax distorts the marketplace, is inequitable and, overall, is a destructive tax instrument.
There is no sensible case for gross-receipts taxation.
Former governor Miller makes the case against class-size reduction
That's not what former governor Bob Miller intended to do in his column today on class-size reduction. But while I was reading through his piece, it was impossible not to notice that Miller had no evidence - beyond parent surveys and numerous assertions - to back up his claim that class-size reduction benefits students.
The first phase of class-size reduction was put in place for kindergartners and first-graders in the 1990-91 school year. ...If something were a cornerstone of my "commitment to helping every child in Nevada succeed in school," I'd want to know whether my commitment actually helped Nevada's children succeed in school.
[W]e preserved class-size reduction, because it was a cornerstone of our commitment to helping every child in Nevada succeed in school.
This has been a significant financial commitment by the state to provide the best opportunities for our children and their future. Since its inception, about $1.8 billion has been invested in class-size reduction. Hundreds of thousands of our students have benefited from it. Every survey conducted has found parents believe strongly in smaller classes, and that their children are better off because of them.
Unfortunately, Nevada's educational performance has been stagnant for decades, despite its class-size reduction program and massive spending increases in education. Nevada now has the nation's worst graduation rate, 41.8 percent. The data also shows that from 1997 to 2007, Nevada's graduation rate declined by nearly 24 percentage points.
To be fair, you can't draw causation from this, because many factors influence graduation rates. If class-size reduction were as important as its supporters assert, though, one would expect to see some (positive) impact on graduation rates.
Instead, Nevada's scores on the NAEP fourth-grade reading exam have been stagnant from 1998 to 2009, while Florida, which passed a series of dramatic reforms starting in 1999, has seen its scores skyrocket.
On the other hand, 32 is the average class size in South Korea, which routinely outscores the United States on international tests. Large class sizes are an intentional part of South Korea's education system, because larger classes allow highly effective teachers to teach more students.
Research has also shown that teacher quality is a much greater factor than class size in determining student achievement.
Government programs need to be judged by their results.
By failing to provide any evidence that class-size reduction leads to better outcomes, Miller actually makes the case that Nevada's class-size reduction policy needs to go.
Assembly Democrats have a plan ... to get a plan
In the Army, they say that "A plan beats no plan," but I don't think this is what they meant.
Speaker John Oceguera said Tuesday that the Assembly will have a tax debate sometime after early May, whether or not he has the two-thirds votes necessary to raise taxes.Yep, Assembly Democrats now have a plan to get a plan in six weeks.
"We will have a revenue discussion ... There will be a discussion on revenue whether there is two-thirds or not," Oceguera told the Las Vegas Sun. "At some point we need to stand up and ask Republicans, 'Is this really the state you want?' " ...
Oceguera said he will wait until after May 2, when the Economic Forum, a group of five business leaders, sets official spending projections. ...
Oceguera said there is no secret tax plan.
First, if someone ever says Nevada needs longer sessions or annual sessions, please remind him of this. By their actions, Assembly Democrats are making the case that Nevada's sessions are too long.
Second, this should put to rest any accusations that Gov. Brian Sandoval, Republicans or believers in limited government aren't "willing to have a conservation," because they won't support tax increases. Sandoval has a budget plan and believers in limited government - like, shameless plug, NPRI - have many ideas to limit spending and spend the money we have more effectively.
Nevada's liberal politicians have ... Bueller? Bueller? Oh, wait - they have a plan ... to get a plan. How could I forget?
If you're going to accuse someone of not wanting to have a conversation, you should at least have something to say.
Third, Democrats probably do have a (secret) tax plan. Horsford wanted to raise $1.5 billion in taxes last summer. They just don't want you to know about it, Ã la the end of the 2009 Legislative Session.
By not releasing their plan publicly, Democrats are likely trying to avoid the political opposition a specific tax-hiking proposal would bring.
That means that to stop a tax hike, believers in limited government must remain vigilant and lawmakers who are opposed to job-killing tax increases must stand their ground.
And those lawmakers won't be alone. More than 680,000 people voted for a no-new-taxes candidate for governor in 2010.
Sandoval and the 680,000+ voter island
Last night, Gov. Sandoval appeared on "Face to Face" and was interviewed by Jon Ralston. In response to Monday's higher-education rally, feelers being put out by Assembly Minority Leader Pete Goicoechea and some recent comments made by Tray Abney of the Reno Sparks Chamber of Commerce, Ralston challenged Sandoval about honoring his promise not to raise taxes (video after the jump, 4:06 mark).
Ralston: So let me get this straight. I'm going to come at you again with this. You have the business group [the Reno Sparks Chamber of Commerce] saying this [they'll agree to tax increases in exchange for reforms]. Essentially the Las Vegas Chamber of Commerce has taken a fairly similar position. The Assembly Republicans have written a letter saying, "If you talk about reforms to the Democrats, we'll be willing to talk about not sunsetting those, those tax increases."Now, Sandoval does a fine job answering this in the interview, but there are a couple of points here I want to make.
You're alone. You're an island, Governor. You're the only guy in the state who's not willing to have a conversation about reform versus taxes. You're alone. No one agrees with you.
Sandoval: I disagree. ...
Ralston: Who agrees with you?
Sandoval: ... What's new?
Ralston: Who agrees with you?
First, this isn't a question about the merits of Sandoval's proposals. It's really just a gut-check for Sandoval's level of political courage, analogous to the "everyone's doing it, so why aren't you?" taunts familiar to any current or former grade-school student.
Second, the premise of Ralston's question is simply false. Who's on the no-new-taxes island with Sandoval?
Let's start with his main gubernatorial opponent, Rory Reid. That'd be an interesting episode of Survivor, but they're hardly alone.
There are also the 680,000-plus Nevada voters who cast their ballots for either no-new-taxes Sandoval or no-new-taxes Reid. Suddenly, the island is looking a lot like Nevada.
Then there's the entire Republican Senate caucus, which has signed a letter clearly stating their opposition to tax increases: "[Y]ou have our unwavering support for your [Sandoval's] plan to balance the budget while fighting job-killing taxes."
And even one of Sandoval's main political opponents, Sen. Steven Horsford, agreed with the governor. It might get awkward on this mythical island.
"I won't support tax increases -- not when the private sector is losing revenue and losing jobs," Horsford told the Review-Journal's editorial board in September [2008].At least, that was Horsford's position when he was running for office. He violated that promise in 2009 and is leading the charge to raise taxes again this session.
"The general fund needs to be managed in a way that doesn't allow growth beyond population growth and inflation."
Sandoval also has a plus-21-point gap between his approval and disapproval ratings.
So, who's on the no-new-taxes island and agrees with the governor? Outside of the Carson City cocoon - most voters, apparently. Looks like those supporting taxes are really the isolated ones (again, outside of the Carson City bubble).
The real question is: "Who doesn't agree with the governor, and why didn't they vote, run for office or, if they did run, be honest in their campaigns?
Video of the interview after the jump. The above exchange starts at the 4:06 mark.
Atlas Shrugged the movie
Our friends at the Reason Foundation have a behind-the-scenes review of the first installment of the upcoming trilogy of Atlas Shrugged movies. Atlas Shrugged: Part I premiers in theatres on April 15 and is sure to ignite enthousiasm - particularly within the Tea Party movement, whose supporters frequently sport t-shirts bearing the question, "Who is John Galt?"
This movie series should also inspire controversy from across the political spectrum. Already, the "progressive" intelligentsia is labeling the film "socially dangerous." Well...at least the ideas portrayed by the film are dangerous for the national-socialist agenda to which the modern American Left adheres.
However, I'm guessing that some of the film's biggest critics will come from the political Right. Ayn Rand's most loyal disciples, the "Objectivists," are notoriously difficult to please and I would expect them all to voice dissatisfaction with any attempt to adapt Rand's masterpiece to the silver screen. This trait has also inspired many of the more prominent Objectivists to lead intellectual attacks against philosophies similar, but not identical, to their own (i.e. libertarianism). Libertarians have responded to these attacks in kind over the years, which has fostered some level of antagonism between the two schools of thought. In fact, perhaps the most critical attack on the Objectivists was made not by the Left, but by none other than Murray Rothbard: "The Sociology of the Ayn Rand Cult."
As an Austro-libertarian myself, I have never made a secret of my affinity for Rothbard. However, I will be the first one through the door to see Atlas Shrugged on opening night and I look forward to seeing the excitement the movie will generate.
Sunshine Week: A review of AB 257
Assembly Bill 257, while short and simple, would have a tremendous impact on the public's ability to participate effectively in government. If passed, this bill would allow the public to comment on each agenda action item as a public body addresses it and before a vote is taken. Currently, public bodies are required to hold only one public-comment period. That period can - and often does - come after voting has taken place.Currently, the Clark County School District utilizes the public-comment process proposed by AB 257. School board President Carolyn Edwards, who spearheaded CCSD's change in format, welcomes the idea of AB 257. She says that while there were some issues in the beginning, the process has made for better board decisions: "I wouldn't want to go back because I think we make good decisions..." And while the CCSD school board takes public input on non-action items, which is not proposed under AB 257, Edwards thinks comment on these items is important as well because they may very well become action items later. "It helps you think about the needs and concerns," she said.
AB 257 would also require a public-comment period on non-agenda matters to come just before adjournment. This would allow the public to know exactly when general comments will be heard. Many times, public bodies hold general comments during the middle of a meeting, after all votes are taken, or the chair, at his or her prerogative, will simply move public comments during the meeting. Often those wishing to speak have missed their opportunity because the meeting moved along quicker than expected or the chair moved the comment period. By placing the item at the end of the meeting, individuals will know exactly when comments will be taken and can plan accordingly.
Finally, this bill would make the public-input process uniform across all public bodies, allowing the public to learn one set of procedures and utilize them effectively across the state. Many times a public speaker, who is used to the procedure of one committee, will be confused about what is expected, because currently, each entity has its own way of taking public comment.
