Commentary - July 2010

Funding the Socialist Vision

Will Nevada Become Another Greece?

by Lyle E. Brennan

    We have all watched the situation in Greece, where failed socialist policies caused a fiscal crisis that almost brought down the entire European economy.  We’ve also seen California brought to the verge of fiscal collapse by an ever-growing burden of debt and unfunded liabilities.  It should be obvious by now that the Democrat party’s vision of cradle-to-grave government handouts will lead to economic ruin for the nation and for individual states that adopt it.  

    But—have Nevada politicians learned anything by these disturbing examples?  Just the opposite.  The 2009 Legislature directed the Interim Finance Committee (IFC) to “review proposals for broad-based business taxes” in order to pay for what it called “quality-of-life goals” for all Nevadans.  These goals were to be developed by a hand-picked committee called the Nevada Vision Stakeholder Group, comprised mostly of people with a vested interest in increasing government programs.  

    The IFC wanted to use taxpayer money to pay research firm Moody’s Analytics to propose ways to fund the so-called goals developed by the Stakeholder Group.  Although Gov. Gibbons vetoed the bill authorizing payment for this boondoggle, the IFC used contingency funds to finance it anyway.  They are now eagerly awaiting Moody’s report, which they will use as an excuse to press for more taxes during the next legislative session.

    It’s simply impossible for the state government to provide everything on the Democrats’ wish list of social programs.  In the first place, we don’t have the money; in the second place, increasing taxes to provide the money takes cash from an efficient system (private enterprise) and gives it to an inefficient and potentially corrupt system (government).  

    Nevada Policy Research Institute (NPRI) recently issued a white paper titled “One Sound State, Once Again,” which details proposals to not only reform the current tax structure, but also to change the way we spend tax revenues.  Rather than blindly accepting what Moody’s Analytics tells us, I think we should consider some of the ideas in this report instead.  You can find the complete article online at www.npri.org/publications/one-sound-state-once-again .

    On the revenue side, comprehensive fiscal reforms would include: eliminating the modified business tax (payroll tax); eliminating the insurance premium tax; broadening the sales tax base to include food and services; and reducing the statewide sales tax rate to 3.5 percent.  To control spending, this plan suggests limiting the growth rate for state spending to the rate of inflation plus population increase - similar to what was proposed in the Tax and Spending Control (TASC) amendment.  

    Under the current boom-and-bust cycle of Nevada budgets, when times are good and tax revenues are plentiful, lawmakers increase government spending and create new programs.  During lean times, they don’t consider eliminating any of these programs; instead, they look for ways to raise revenues to continue funding them.  All expenditures from the previous budget cycle are carried forward, and then increased by adjustments for inflation, caseload growth and cost-of-living payroll increases.  No wonder government growth keeps going and going like the Energizer Bunny.

    NPRI proposes a new process called Budgeting for Outcomes, in which the Executive Branch looks at goals established by the Legislature (not a rubber-stamp commission) and then solicits bids from public and private vendors to provide the services needed to accomplish those goals.  Existing programs and agencies are reviewed periodically to see if they are still required and if funding is needed at current levels.

    When the report from Moody’s Analytics is released, take a good look and see if the proposed “goals” match yours, and if the method of funding those goals seems practical and equitable.  If not, let your state legislators know that we should consider other alternatives before it’s too late.

Lyle E. Brennan Publisher
COMMENTS? email: lyle@nbj.com