Do taxes change behavior? Ask Manny Pacquiao
Taxes are influencing where boxing star Manny Pacquiao will have his next fight, and it's bad news for Las Vegas.
Manny Pacquiao's chief adviser insisted Monday that the Filipino superstar's preference is for his next bout – a fifth fight against Juan Manuel Marquez – to take place away from Las Vegas, with the off-shore Chinese gambling resort of Macau emerging as the "favorite."
The Dec. 8 fight between Manny Pacquiao and Juan Manuel Marquez was held at the MGM Grand in Las Vegas. Michael Koncz told Yahoo! Sports that the 39.6 percent tax rate Pacquiao would face if he were to fight again in the U.S. makes a fall bout in Las Vegas "a no go." ...
"Manny can go back to Las Vegas and make $25 million, but how much of it will he end up with – $15 million?" (Promoter Bob) Arum said. "If he goes to Macau, perhaps his purse will only be $20 million, but he will get to keep it all, so he will be better off."
Even though Pacquiao would make $25 million if the fight was held in Vegas, you know who else would have benefited? Workers in hotels and restaurants who would have benefitted from the extra tourists.
This is yet another example of how punishing the "rich" hurts folks at all levels of the economy and a reminder for liberals like Steve Sebelius that higher taxes do indeed hurt businesses.
(h/t Americans for Tax Reform)
Read moreThe Mob Museum, one year later
Every week, NPRI President Andy Matthews writes a column for NPRI's week-in-review email. If you are not getting our emails, which contain our latest commentaries and news stories, you can sign up here to receive them.
The Mob Museum, one year later
Remember this?
That’s a link to a news video that Kyle Gillis, a reporter for NPRI’s Nevada Journal, produced one year ago today. The story covered the grand opening of the National Museum of Organized Crime and Law Enforcement, popularly known as the Mob Museum, and spotlighted criticism from NPRI and the Taxpayer Protection Alliance over the use of public funds for the project — as well as some colorful reaction from former Las Vegas mayor Oscar Goodman, the museum’s primary champion.
In the video, Goodman boldly predicts that the museum will draw 800,000 visitors in its first year of operation, while acknowledging that he’s been cautioned to put the actual number at a more realistic 400,000 or 500,000. Oh yeah, he also refers to critics of the project — which was subsidized with $42 million in taxpayer money — as “idiots,” “morons” and “monkeys.”
It was with great interest, then, that I read Kyle’s follow-up piece on the museum yesterday while eating my morning banana. One year later, the numbers are in. How many visitors did the Mob Museum attract? 800,000? 500,000? 300,000?
Try 250,000.
Hizzoner was over-confident by a mere 320 percent.
Now, I recognize that schadenfreude can be awfully off-putting, so let me be clear that my intent here is not to embarrass Oscar Goodman for being embarrassingly wrong. He’s just guilty of making the same mistake that so many of our politicians have made — albeit with an extra-heavy dose of hubris to go with it.
Rather, my point is to call attention to a lesson that our policymakers better learn, and fast: that glitz, glimmer, fanfare and all the clever marketing and media savvy in the world may be able to fool some of the media and public — but they can’t fool the laws of markets and economics.
The reason the Mob Museum’s underperformance was so easy to predict is the same reason so many other such endeavors have failed. When politicians substitute their judgment for that of consumers acting in a free market, the results are never good. As I wrote at the time of the museum’s opening:
That is exactly why it should be left to the private sector to do these things. Maybe the Mob Museum is a good idea. Maybe it's a bad idea. But such an idea should be funded by individuals willing to risk their own money — or it should not be funded at all. Allowing the free market to determine which projects move forward ensures that the decision will be based on consumer demand, not on political appeal.
That basic principle is as true today as it was one year ago, 100 years ago and 1,000 years ago. And it will be no less true 1,000 years into the future. Yet remarkably, one thing that’s every bit as consistent as that principle is the stubborn insistence from politicians that they’re capable of finding a way around this time-tested system. Which means the rest of us must be equally steady in our commitment to holding them accountable.
As Kyle’s story notes, the Mob Museum drew just enough visitors in its first year to break even financially, and only then because it doesn’t have to pay back the $42 million in subsidies. But what happens during future years, as the novelty declines and it fails to achieve even that token level of success? Just like we’ve seen with other misguided government efforts, such as the Monorail and the Springs Preserve, taxpayers will likely end up footing the bill for the museum’s operating costs.
As Taxpayer Protection Alliance President David Williams said when the museum first opened: “This really is a no-win situation for the taxpayer.”
A year later, it’s clear that taxpayers are indeed — and quite predictably — losing.
Thanks for reading, and I’ll see you next time.
Andy Matthews
NPRI President
Remember, if you'd like to receive the latest from NPRI, sign-up for our emails here.
Let's raise the minimum wage to $900 an hour
During his State of the Union address, President Obama called for raising the federal minimum wage to $9 an hour.
[L]et's declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. We should be able to get that done.
This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets. And a whole lot of folks out there would probably need less help from government.
Obama touches on the liberal argument for raising the minimum wage, but let me spell it out more directly here.
Raising the minimum wage to $9 an hour wouldn't increase unemployment, but would give poorer workers more spending money. Since poorer workers tend to spend any cash they receive immediately, this would help the economy.
If this is true, why stop at $9 an hour? If government can "raise the incomes of millions of working families" through unconstitutional mandates and not hurt those workers or the broader economy, it's time to raise the minimum wage to $900 an hour.
Who's with me?
Liberals — even the very liberals who make the above argument — don't support that plan though. I know because yesterday on KNPR's State of Nevada I asked Danny Thompson, Secretary-Treasurer of Nevada's AFL-CIO, and David Cooper from the liberal Economic Policy Institute to support that very idea. Both passed though, with Cooper acting like the idea was absurd.
And of course the idea's absurd. But it's an idea based on the very principles Cooper, Thompson and Obama espouse.
What are the true impacts of the minimum wage? A recent Las Vegas Review-Journal editorial puts it well.
Harvard University's Greg Mankiw says there is 79 percent agreement among his peers that "a minimum wage increases unemployment among young and unskilled workers" - ranking just below the fact that a "large federal budget deficit has an adverse effect on the economy," at 83 percent.
"Tonight, let's declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to nine dollars an hour," the president said.
But economists have demonstrated that hardly anyone tries to raise a family on the minimum wage. Rather, low-income jobs provide a bottom step on the ladder for young and inexperienced workers, who quickly earn raises as they improve their usefulness to employers.
One of the terrible ironies here: The most pernicious effects of a high minimum wage — a sop to the labor unions who have long considered Mr. Obama their go-to guy - are felt among minority youth, who already struggle mightily to reach that "bottom rung."
While the overall U.S. unemployment rate stands at 8.1 percent, African-American unemployment is now at 14.1 percent, and the official unemployment rate for black youth ages 18 to 29 is 22.3 percent.
Bonus: Here's Milton Friedman detailing the destructive impacts of the minimum wage.
NPRI praises digital learning in testimony to Assembly Ed Committee
Today, Geoffrey Lawrence, NPRI’s deputy policy director, offered the following testimony to the Assembly Education Committee.
Mr. Chair and members of the committee, I thank you for the opportunity to address you today. The Nevada Policy Research Institute has always encouraged the aggressive use and expansion of digital learning.
Digital learning can provide a student-centered learning environment and deliver a customized and stimulating curriculum for the students who engage in it.
Further, digital mediums grant students access to the best teachers and expertise in the world. Particularly for students who reside in Nevada’s rural areas, who otherwise might never gain exposure to the world’s greatest teachers, digital education offers an exciting opportunity capable of preparing these students for success in a digital, 21st Century world.
At the same time, because digital mediums make innovative distance learning programs possible, they offer greater flexibility to families in which students or parents maintain unconventional schedules for work or extracurricular activities. Further, distance learning can obviate the need for the construction of additional classroom capacity in traditional schools, thereby lowering costs to taxpayers.
Of course, digital learning doesn’t solely mean distance learning and it needn’t replace classroom teachers. Instead, teachers in schools that have embraced digital learning have utilized the expertise of teachers across the world to supplement their own classroom lectures. In fact, many free resources, such as the Khan Academy and iTunes University, allow teachers to build their students’ understanding of academic concepts to an extent that was previously unthinkable.
Please allow me to provide an example:
At Clintondale High School, outside of Detroit, principal Greg Green was frustrated by the chronic failure of his students. Nearly three-fourths of his students came from low-income families and were free- or reduced-lunch eligible. So Green came up with the idea for a pilot program: He encouraged his ninth-grade teachers to “flip” their classrooms by developing their lectures on a digital platform, often incorporating resources such as Khan Academy, and assigning these lectures as homework. Then, during classroom hours, students were to work through the problems that would traditionally be assigned as homework. In the “flipped” classroom, teachers were standing ready to help students with these problems whenever they struggled.
Students enoyed watching digital presentations on their laptops, tablets or smartphones. And for those who didn’t have these resources, Green held the school’s computer lab open for longer hours.
The program was so effective that Green expanded the program school-wide for the 2011-2012 school year. The results speak for themselves. That year, the school’s failure rates in English plummeted from 52 percent to 19 percent. In math, failure rates fell from 44 percent to 13 percent. In science, 41 percent to 19 percent, and in social studies, 28 percent to 9 percent. Attendance rates also improved while disciplinary infractions declined as students began to take greater interest what they were being taught.
The “flipped” school model is one of the best demonstrations of how effective digital learning can be and offers a new model of reform for our public schools. Thank you.
Hickey: Beware unintended consequences
Policy proposals have two types of consequences: those that are seen and those that are unseen.
Policy debates often center on the "seen" consequences, even though the "unforeseen" consequences usually have a larger impact. The perfect example of this was AB 284, which virtually stopped notice of default filings, a necessary step in the foreclosure process, in October 2011 and is creating an artificial housing bubble in Nevada. At the time, legislators debated the "justice" of allowing banks to foreclose on a home where an "owner" had stopped making payments.
That's why it's refreshing to read Assembly Minority Leader Pat Hickey detail the need to be aware of unintended consequences.
In Australia in the late 1800's, a landed gentleman from England thought "the introduction of a few rabbits could do little harm, and might [even] provide, a touch of home."
The result? Rabbits being the extremely prolific creatures they are, have wreaked ecological havoc on the land of the "Down Under." Cute little Cottontails have contributed mightily to the erosion of topsoils and the destruction of native trees, throughout the Australian bush.
Such is the law at work, of unintended consequences. ...
Before deciding that any new taxes, or even a supposed "revenue neutral" new tax structure should be unleashed on the Nevada economy--lawmakers should seriously invite all affected parties to contemplate the implications of any such change: and listen to what they say. ...
Despite what may sound like doom and gloom (or cranky conservatism), this is the time to have a serious sit down about Nevada's tax structure. It should also be a time for us to be aware of what is down the rabbit hole. "Wonderlands" can result in chaos and confusion--just ask "Alice."
There's a compelling case to be made for revenue-neutral tax reform — and NPRI's made that case here — but revenue neutral must be truly revenue neutral. For instance, trading temporary taxes for permanent ones isn't revenue neutral.
Regardless of where you are on the tax debate, it's great to see one lawmaker acknowledge that ideas have consequences — and those consequences often aren't the intended ones.
Surprise: Liberals want to make 'temporary' tax increases permanent
Of course if you've been paying attention — and since you're reading this blog I know you are — this isn't a surprise at all.
If some Nevada lawmakers have their way, the sun may never set on the $650 million tax increase that was supposed to be temporary.
The tax increase, originally passed in 2009 to help the budget through the worst of the recession, was set to expire or “sunset,” but it has not done so. Now, some legislators are saying some of the increases should be permanent.
The Legislature’s tax committees plan to meet at 1 p.m. today to begin that discussion.
“Instead of just kicking something down the road two more years, this is the time to make the decision on those,” said Senate Majority Leader Mo Denis, D-Las Vegas. “Are we going to keep doing them, or are we going to stop doing them?”
I hate to play the NPRI-told-you-so card, but NPRI told you so. Here's what Geoffrey Lawrence, NPRI's deputy policy director, said after the Legislature passed these "temporary" taxes in 2009.
It's likely that if those who voted to raise the tax burden in this session return in 2011, they will claim that an indefinite extension of those "temporary" tax increases would not be a tax hike at all, since Nevadans would already be paying the new taxes.
And here's what Kirkpatrick recently told the Las Vegas Sun:
“Folks have already been paying [the sunset taxes] for four years, and they're pretty already accustomed to it,” Kirkpatrick said.
Here's what Lawrence wrote after the Legislature and Gov. Brian Sandoval extended the sunsets in 2011:
Lifting the sunsets also underscores the dangers of a “temporary tax hike” — when government agencies use one-time revenues to fund ongoing operations, they become dependent on those revenues and the “temporary” taxes rarely expire.
With the sunset date being pushed to 2013, Nevada’s citizens will now have to wait at least two more years for their politicians to keep their word.
And why do Democratic leaders want to permanently raise your taxes?
To avoid playing defense every legislative session, some Democrats have said that some of the taxes should be permanent, especially when they pay for services such as public education that have broad, bipartisan support.
The negative impacts of permanently extending the sunset taxes are two-fold. First, higher taxes take money away from individuals, families and the economy.
Second, higher taxes would allow government to keep pouring money into broken systems — especially K-12 education — instead of implementing the structural reforms that cost less and increase results.
That's another lose-lose scenario that's easy to predict.
Superintendent Jones uses arbitrator's decision to push dishonest budget cut claims
Yesterday, an arbitrator in the labor dispute between the Clark County School District and the Clark County Education Association ruled in favor of CCSD.
The unelected, unaccountable arbitrator with offices in Minnesota and Nevada choose CCSD's offer, which will result in teachers no longer receiving the step and education increases they had been receiving since the beginning of the year. Also, teachers will no longer have to pay $30 a month to the Retiree Health Plan.
While the whole situation is another great case study for why the Legislature should eliminate binding arbitration and evergreen clauses, Superintendent Dwight Jones instead used the arbitrator's decision to push false information about CCSD's budget, saying in a statement:
The District is relieved today that the arbitrator chose our contract proposal because it will help us balance our budget, which has been cut by $550 million over the past six years. This decision supports the District's priority to put more teachers back into classrooms.
Saying that CCSD has cut $550 million over the past six years is factually wrong. This is seen via CCSD's own budget figures.
When previously contacted by NPRI, CCSD provided a spreadsheet showing the "cuts" that supposedly total $596 million. An inspection of the spreadsheet, however, reveals that many of the listed "cuts" are merely decreases in spending increases the district wanted.
What's so self-defeating about these deceptions is that CCSD has already admitted that without changes to NRS 288, Nevada's collective bargaining statute, further Legislative funding increases will only entrench the status quo. That's because if CCSD has additional funding, the unions representing CCSD's teachers, administrators and support staff workers will be able to use collective bargaining to force substantial increases in salaries and benefits.
Instead of explaining to the public how binding arbitration has led to unsustainable increases in spending which can force reductions in other areas even if total spending is increasing, CCSD officials, including Superintendent Jones, are actively advocating for additional funding that the teachers union will have more control of than they will.
This is but one example of why Nevada has gone from spending $430 a student in 1960 to spending $8,865 per pupil in 2009, but hasn't increased student achievement.
I'm from the government, and I can't help you
Every week, NPRI President Andy Matthews writes a column for NPRI's week-in-review email. If you are not getting our emails, which contain our latest commentaries and news stories, you can sign up here to receive them.
I'm from the government, and I can't help you
President Ronald Reagan would have turned 102 years old this week. The Great Communicator was full of wonderful stories and anecdotes. One of my favorites was his quip that “I’ve always felt that the nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’”
I was reminded of that statement this week as I visited with lawmakers and walked the halls of the Legislative Building in Carson City. There are a lot of energetic and intelligent politicians in that building, but how many of them understand what Reagan put so simply? Once government goes beyond performing its core functions in the most efficient way possible, it doesn’t solve problems — it makes them worse.
In many cases, the challenge isn’t in determining whether government should try to solve a problem or not, but in getting politicians to recognize that government simply can’t solve it.
Let me illustrate this with a recent story I read about Obamacare. Leaving aside how Obamacare infringes on religious liberty and the fact that 7 million people will soon be involuntarily losing their job-based insurance coverage because of it, let’s examine its impact on emergency room visits.
Advocates of Obamacare insisted the country would save money by mandating that people buy insurance, because having insurance would cut down on emergency room visits. Instead, as detailed by Jennifer Robison in last Sunday’s Las Vegas Review-Journal, Obamacare is actually going to increase emergency room visits.
For a glimpse of how bad things could get in Nevada, consider Massachusetts.
In the two years after that state's individual insurance mandate took effect in 2006, emergency room visits jumped 9 percent, according to the Massachusetts Division of Health Care Finance and Policy. ER visits kept increasing through 2012, when they finally began dropping for reasons that are not clear to industry observers.
ER visits rose because when people have coverage, they are more likely to go to the doctor. They may have a chronic illness they can finally afford to treat, or they might schedule a checkup because they have insurance and want to use it. As doctors' appointment books fill up, more people go where they cannot be turned away — an emergency room.
Nevada could see an even more dramatic shift into ERs, said Dr. Mitchell Forman, dean and professor of medicine at Touro. ...
"Whenever people have difficulty getting an appointment or accessing the system, the emergency department becomes the default place most people go," [Nevada State Medical Association Executive Director Larry] Matheis said. "Everybody is expecting it. Hospitals are bracing for it."
There are plenty of other examples of government’s inability to solve problems, including Nevada’s Hardest Hit Fund, which can’t even give away taxpayer dollars in a timely manner, and Nevada’s repeated and failed attempts to improve student achievement by increasing education spending. But I’d rather leave you with more quotes from the greatest president of the 20th Century than detail those failed programs.
These are pearls of wisdom our elected officials should remember before they offer to “help.”
“Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
“Government exists to protect us from each other. Where government has gone beyond its limits is in deciding to protect us from ourselves.”
“Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other.”
“The trouble with our Liberal friends is not that they're ignorant; it's just that they know so much that isn't so.”
“When you can't make them see the light, make them feel the heat.”
Take care,
Andy Matthews
NPRI President
Remember, if you'd like to receive the latest from NPRI, sign-up for our emails here.
Kirner takes the lead on reforming Nevada's faltering pension system
Officially, Nevada's unfunded pension liability — the difference between assets/future investment earnings and liabilities — is $11.2 billion. If, however, you calculate the liability using fair-market valuation, which is endorsed by the vast majority of professional economists, the unfunded liability is over $40 billion.
For some context, Nevada's state general fund budget each year is just over $3 billion. That's what is known as a big problem, even if it's not a crisis point right now.
Leadership involves acknowledging a problem like this and then proposing a substantive solution for it — even if doing so means taking on a powerful special interest group.
Fortunately, Assemblyman Randy Kirner is up for the challenge.
Gov. Brian Sandoval is taking a measured approach toward changes to Nevada's public employee pension plan, but at least one state lawmaker says action is needed now.
"There are a number of red flags that have popped up for me that are cause for concern, and they should cause anyone in the system today and already retired, concern as well," said second-term Republican Assemblyman Randy Kirner.
The Reno lawmaker has requested a bill for the 2013 legislative session that would significantly alter the current defined benefit pension plan - but only affecting future state and local government employees - to get a handle on a long-term unfunded liability that hit $11.2 billion as of June 30, 2012. The unfunded liability has grown by $1.2 billion over the past two years.
Kirner's bill, which is still being drafted, would create a hybrid plan with about a third of the pension in a defined benefit and two-thirds as a defined contribution. There would also be a contribution aimed at reducing the unfunded liability.
Read the whole article to get a better sense of how important it is to fix this issue now, instead of kicking the can down the road.
While we'll have to wait until the bill is drafted to examine the plan in detail, a hybrid pension system is already in place in Utah.
And what happens if a government lets unfunded pension liabilities spiral out of control? This.
Kirkpatrick rips union-backed margin tax
The union-back margin tax was never going to pass the Legislature, but that didn't mean watching Speaker Marilyn Kirkpatrick tear it to shreds on Ralston Reports last night was any less sweet.
Her comments start at the 17:05 mark (watch online here), and what follows are my favorite quotes.
Kirkpatrick: I personally think that there are some technical problems (with the margin tax) that are not beneficial to the state.
Kirkpatrick: And Texas actually has put in a bill to repeal the margin tax. And I think we should step back and look at that.
Kirkpatrick: I think that we'll have some committee hearings where we'll see that 25 percent of [Texas'] revenue that they had projected (after passing the margin tax) was actually lost. We would definitely want to make sure we don't do that same thing.
These defects (and more) in the margin tax have been pointed out many times by NPRI, and it's great to see that Kirkpatrick thoroughly understands them. As the Tax Foundation says, "There is no sensible case for gross receipts taxation, or modified gross receipts taxes such as a Texas-style margin tax.”
Even after the legislature fails to pass the margin tax, the battle isn't over. The margin-tax proposal will go to voters in 2014, and the union bosses who would be the primary beneficiaries of the tax will fight for it tooth and nail.
