The Sagebrush State, 3Rd Edition: Nevada'S History, Government, And Politics

Chapter Ten State and Local Finance

Chapter Ten State and Local Finance Supreme Court Justice Oliver Wendell Holmes once noted that taxes are the price we pay for a civilized society. Although most can agree with Holmes’s sentiment , questions over who will pay taxes and how those funds will be spent inevitably invite disagreement. Indeed, revenue and appropriations questions are the epitome of what we call “politics.” Deciding who does and who does not pay taxes and who benefits from these moneys is the quintessential method of determining the winners and losers in the world of politics and government. As noted in chapter 2, political conflict over taxation began early in the state’s history. Territorial governor Nye had battled with the legislature at its first session in 1861 over whether mines and/or their products would be taxed. The 1863 constitution had been defeated, at least in part, because it included a provision taxing mines at the same rate as all other property. That “indiscretion” was avoided in the 1864 constitution, which taxed only mining proceeds. Mines, however, were not the only industry in the state attempting to bene- fit from sympathetic constitutional provisions. The failed 1863 constitution had also included a section allowing the state to issue up to $3 million in bonds to assist in building a railroad. Noting that Nevada would be a poor state, especially since the delegates decided to limit taxes on the state’s major industry, the 1864 delegates rejected a similar proposal to aid the wealthy railroad companies and included a provision in Article 8 prohibiting the state from donating or lending money or its credit to any corporation other than those considered educational or charitable. The state constitution requires the biennial budget to be balanced. The federal government has had deficit budgets in most years since 1969, but Nevada’s officials must equalize revenue and appropriations with a surplus available to deal with any emergencies that may arise. That has been made difficult over the years for a number of reasons: population growth, economic downturns, a general anti-tax stance within the state, and biennial budgeting. For several years, Nevada has been the fastest growing state in the nation. That growth has meant unpredictability in budgeting for two-year cycles. In the 2000 census, Nevada’s population was 1,998,257, an increase of over 66 percent from the 1990 census, and quadruple the 488,738 living here in 1970. This phenomenal 66.3 percent growth rate in the state between 1990 and 2000 is all the more extraordinary when compared to a national growth rate of only 13.1 per110 cent. Of these almost two million residents, 1,375,765, or 68.8 percent, live in Clark County, which had an almost unbelievable growth rate between 1990 and 2000 of 85.6 percent. Although these new residents pay taxes, those revenues are spread over their lifetimes, while their needs (schools, roads, hospitals, recreation ) are immediate. For example, even before they have paid a penny in taxes, these newcomers require roads for their cars and schools for their children. The need for immediate services among the fastest growing population in the nation has put tremendous strain on the state’s ability to meet its citizens’ needs, especially when budgets must be approved for two years at a time. Biennial budgeting is even more difficult when it is based on an unstable revenue base. Over half of Nevada’s revenue is based on gaming and sales taxes. These taxes are the most unstable of all types and create a certain degree of unpredictability in estimating state income over a two-year period. In an economic downturn, such as the state faced in the 1991–93 biennium, and after the World Trade Center attack fewer people are likely to visit the gaming tables or purchase big-ticket items. Thus, in a recession, when residents’ needs for state services such as unemployment compensation, food stamps, and welfare are at their highest, the revenues coming into the state’s coffers from gaming and sales taxes will be in decline. It was once observed that the perfect legislator is one who “votes for all appropriations , and against all taxes.”1 Indeed, most citizens want the government to offer a multitude of services; they simply do not want to pay for them. That is equally true in Nevada, which has managed to shift much of the tax burden to the state’s visitors in the form...