By Daniel Honchariw
Gov. Brian Sandoval’s recent demand that, “Anyone supporting a repeal of the Commerce Tax must explain to Nevada’s children, families and businesses which education initiatives will be cut if it is eliminated“ is disingenuous, at best.
Sandoval is clearly implying that revenues from the Commerce Tax are specifically earmarked for education spending, and that without them education is poised to see a substantial loss of revenue.
Neither implied claim is true, as the state’s own financial report shows:
Because Commerce Tax revenues feed into the State General Fund, they can be used for a myriad of state priorities, not just education. So while it is true that increases in the general fund are likely to also increase education spending, it is misleading to suggest that all Commerce Tax funds go directly toward education.
Moreover, general fund revenues are still forecasted to increase — even without the Commerce Tax. A repeal would merely decrease the rate at which spending is expected to increase.
Of course, referring to a decrease in the rate of an expected spending increase as a “cut” is a common tactic used by big-government advocates to mislead voters. Nonetheless, it remains indisputable that general fund revenues — and thus the ability to spend more on education — are forecasted to rise considerably with or without the Commerce Tax.
As the below chart illustrates, even if Commerce Tax revenues are excluded from fiscal year 2016 — the first year in which the tax was levied — statewide revenues still increased by $438 million year-over-year, or 8 percent.
The same trend likely holds for fiscal year 2017, although official numbers from the Tax Department aren’t available until January 2018.
Even more, the Commerce Tax provides businesses with a 50 percent credit against their modified-business tax liability — meaning that, in the event the Commerce Tax is repealed, the actual net-revenue “loss” to the state could be as little as half of its annual revenues. In fiscal year 2016, this would’ve amounted to about $70 million, or only 1.1 percent of the state’s total tax revenues of $5.94 billion.
So, don’t get lost in the spin! Nevada is going to spend record-high amounts on education in the years ahead, regardless of what happens with the destructive and distortive Commerce Tax.
Daniel Honchariw is a labor and fiscal policy analyst with NPRI.
Pension debt is going to take an even bigger chunk out of Nevada’s government budgets in the coming years, forcing cuts in spending that would otherwise go to schools, parks, road repair and public safety.
In 2015, the nearly $1.5 billion that taxpayers sent to PERS consumed more than 10 percent of state and local governments’ combined own-source revenue, which was the second-highest rate nationwide.
But that number is set to increase dramatically beginning in 2019, as a result of today’s decision by the PERS board to slightly pull back the veil that shrouds the true size of the System’s debt.
“While today’s decision by the Public Employees’ Retirement System of Nevada (PERS) is a small step in the right direction, it ultimately highlights a fundamentally broken governance structure that encourages costs to be pushed onto future generations,” said Robert Fellner, transparency research director for the Nevada Policy Research Institute.
“Years of relying on flawed accounting metrics designed to understate the System’s true cost have left today’s public workers and taxpayers holding the bag. This isn’t just unfair, it’s also an incredibly inefficient way to attract and retain talent — particularly teachers,” he added.
Moving closer to acknowledging the true size of PERS debt, said Fellner, means that current public employees and taxpayers will have to pay more in the coming years — while receiving no added benefit of any kind — to bail out the System’s past funding failures.
Future hires will fare the worst, he said.
A 2015 Legislative change designed to stem the state’s exploding retirement costs reduced the PERS benefits that will be offered to most public employees, but only those hired after July 1, 2015.
This means new Nevada teachers will have to pay some of the highest rates in the country to PERS, in order to help fund the much-richer benefits their veteran counterparts are, or will be, receiving.
Unfortunately it’s quite simple, said Fellner: “New hires will have to pay more, while getting less.”
Scholars at the Bureau of Labor Statistics have noted that such a counterproductive compensation structure is almost certain to negatively affect the quality and retention of current teachers.
“To be clear,” Fellner added, “the problem isn’t today’s decision to slightly reduce the degree by which the System’s costs are obscured. The problem is a governance and accounting structure that encourages defraying costs as long as possible, and then dumping those costs onto a generation of taxpayers and public workers who received none of the services.”
Absent fundamental pension reform, he said, today’s scenario is destined to repeat itself in coming years, but with more devastating effects — particularly in the case of a market downturn.
“Left unchecked, Nevada’s pension albatross will continue devouring tax dollars at the expense of other public services like education, public safety and road repair.
Promoters and Spin Doctors At Work
Before we continue with the pipeline bond discussion, some historical context of TRIC-Storey County is in order…
Lance Gilman. Brothel Owner, TRIC Executive and Storey County Commissioner
Behind the Scene Water Dealings
By Daniel Honchariw
When companies get too big to operate efficiently or competently, they go out of business — but in government, such failure actually protects the ever-growing bureaucracy.
The Nevada Tax Department’s accounting policy — or lack thereof — with regard to the commerce tax is a perfect example.
The commerce tax, for a wide range of reasons, is not popular. A similar tax was previously rejected by nearly 80 percent of voters in 2014, and there’s now an effort by former state Sen. Bob Beers and State Controller Ron Knecht to have voters reject this version as well on the 2018 ballot.
Unfortunately for citizens aspiring to understand the actual merits of the repeal debate — including the impact the tax has had on certain industries — bureaucracy is getting in the way.
The issue arises from the Tax Department’s lack of transparency regarding how it accounts for commerce tax revenues.
Sure, the department will readily provide documents detailing gross annual revenues — we know, for example, that the commerce tax collected about $143 million in fiscal year 2016.
Interestingly though, and without explanation, the department doesn’t account for revenues on a by-industry basis — which seems particularly odd, given that the tax was specifically designed to collect revenues from multiple industries at different rates.
The revelation came when the Nevada Policy Research Institute requested this important industry-specific breakdown.
“We don’t currently have a report or any agency record that breaks out collections by industry, but we are looking at developing a report (as time and resources allow),” is the response the institute received after requesting, pursuant to Nevada’s public-records law, a full accounting of commerce tax revenues by industry for fiscal years 2016-17.
This lack of information is troubling because it obscures one of the most controversial aspects of the commerce tax: that it was enacted to favor — or can be tweaked to favor — certain industries over others.
Such is evident by the plain text of the law, which calls for 24 unique tax rates to be assessed, depending on “the business category in which the business entity is primarily engaged.”
The mining industry, for example, is taxed at a rate of 0.051 percent, while “educational services” are taxed at 0.281 percent — more than five times the rate for mining!
The basis for levying 24 unique rates is, ostensibly, that each industry has different “expected” margins of profit. Given the debate about repeal, the question right now is what effect has this had on those 24 different industries?
Under current policies at the Tax Department, we have no way of knowing — a baffling circumstance, given that the Department itself is tasked with levying these various rates on businesses.
As it is right now, the department’s policy hides the full impact of this unpopular tax. It’s an oversight that must be corrected immediately by publishing a by-industry accounting.
Failure to do so would indicate the department is unwilling to have an honest and comprehensive debate over repeal as the 2018 cycle nears.
Daniel Honchariw is a labor and fiscal policy analyst at the Nevada Policy Research Institute, a free-market think tank. This commentary was originally published by the Reno Gazette-Journal.
As we reflect on the tragedy in Las Vegas over the weekend, we at the Libertarian Party of Nevada (LPN) are warmed and heartened by what we witnessed in the aftermath of this horrific event. In the face of terror and tragedy Nevadans and Americans come together to help those in times of despair and need.
By Ron Knecht and James Smack
Recently, James went to Portland, Oregon for a concert and to celebrate his 17th wedding anniversary with his lovely wife, Vicki.Read more
By Ron Knecht and James Smack
Lately, when we tune in or read national political news, it’s virtually the same stuff every day. If you’re watching a left-leaning outlet like CNN or MSNBC, or reading the New York Times, Washington Post, USA Today or HuffPost, it’s almost all about either Russia or some leak from the White House.
If you’re watching Fox, it’s almost always about how the deep state is undermining the Trump Administration or the corruption of the Obama Administration.Read more
By Ron Knecht and James Smack
Sometimes Nevada can be, well, uniquely Nevada.
Perhaps this’s why, in this major fire season and after great amounts of snow and flooding from the melt, a state of emergency was declared. A state of emergency because recreational cannabis dispensaries are running out of weed!Read more