For the working class, Nevada’s economic priorities are cruel and unusual, and any thoughtful policy maker should be appalled at having anything to do with allowing the status quo to continue. (Getty Images)
A year ago the annual inflation rate was north of 9%. Over the last 12 months it was 3.2%.
But just because prices aren’t rising as fast as they were, a lot of prices are still rising.
Inflation is driven by a combination of national and global factors. The prices of food, gas, electricity (which is more expensive nationwide, not just in Nevada), and other common household expenses are the result of external forces beyond the scope of local or state government control or influence.
As a rule.
But not entirely.
Nevada is in a unique position in which elected officials, should they choose to do so, could take actions that would help the state’s residents who are struggling to make ends meet.
The Nevada way: Tax the working class
Nevada consumers pay the 7th highest base sales tax rate in the U.S. When prices of taxable items increase, so does the amount of sales taxes consumers pay. Nevada’s unusually large reliance on sales taxes instead of other types of revenue has earned the state a ranking as the 5th most regressive and unfair state tax system in the country.
Nevada’s old argument – actually it’s more of a faith – which still lazily passes as conventional wisdom, is that the sales tax is good policy because the tourists pay so much of it.
It’s a clownish assertion in a state with more than 3 million people collectively spending who knows how many tens of millions of dollars each day to buy laundry detergent, cheeseburgers, pet food, cars and other items subject to the sales tax.
If state policymakers are so convinced that relying on the sales tax as the largest source of state general fund revenue is good and fair policy because the tourists pay it, then (as I wrote in a column earlier this year) “let them put all that money where their mouth is: Keep the 8.375% sales tax rate – in the Strip corridor, and lower it everywhere else.”
Nevada – a place that eschews a commitment to public transit in favor of cars lined up bumper-to-bumper on 7-lane streets – also levies the nation’s second highest tax on insurance premiums. According to the National Association of Insurance Commissioners, the only state with a higher insurance premium tax rate than Nevada’s 3.5% is Hawaii, at a little more than 4%. The tax on insurance premiums in the overwhelming majority of the rest of the states is closer to 2%, and often less.
In fact, in Nevada, the tax on insurance premiums is the fourth largest source of state general fund revenue, which is a weird thing, it just is.
Nevada is often ranked as having some of the highest auto insurance premiums in the nation, a distinction typically attributed to the fact that 75% of the population lives in Las Vegas, which can be, you know, Las Vegasy.
But maybe the fact that Nevada’s insurance tax is twice as high as just about anywhere else has something to do with it.
The insurance premium tax also applies to health insurance, by the way. Such a friendly state.
But maybe you made a killing on the buybacks
Nevada’s governor and legislators could relieve some of the financial strain on working households by calling a special legislative session and dramatically lowering both the sales tax rate and the insurance premium tax rate.
The loss in revenue could be made up by increasing Nevada’s lowest-in-the-nation taxes on the gambling industry.
In the last two years, MGM alone has spent $3.2 billion on stock buybacks – more than a billion dollars beyond what the entire Nevada gambling industry is projected to pay in state gaming taxes over the next two years. Bally’s, Boyd and other resort operators are following along and authorizing hundreds of millions of buybacks of their own.
Other than the substantial portion of money spent on buybacks that routinely goes to CEOs, much of that money is just flying out of the state to placate, impress and enrich wealthy investors. Buybacks do nothing to enhance the economy, spark innovations, or make the world a better place.
Keeping that money in Nevada through higher gaming taxes, while lowering regressive taxes paid by Nevadans who are trying to make ends meet – that would be making the world a better place.
Lowering regressive sales and insurance taxes wouldn’t bring prices down in some dramatic fashion.
But having to pay an extra 8% to the state every time a working class household buys pet food, fast food, clothes and other taxable items is harmful to families. Any thoughtful policy maker should be appalled at having anything to do with allowing it to continue.
And officials have been chasing headlines over far less significant priorities. Gov. Joe Lombardo’s recent private school gambit that he threw so much political theater at was much ado about maybe 350 students. Lower sales and insurance taxes would benefit hundreds of thousands of households.
Switching the state’s tax burden from working class consumers to the world’s largest casino/resort corporations would not only help Nevadans right now, but also in the future. Many Nevada households will still be struggling even if prices fall, just as they have been since the Great Recession more than a decade ago, because the state never fully recovered from it.
Nevada’s governor and lawmakers will not do any of these things, not in a special legislative session, nor in a legislative session of any kind.
Giving working class families an economic break isn’t a shiny object like a baseball field. Nor is it something the resort industry wants, like a publicly financed program to keep homeless people off the fabulous Las Vegas Strip by rounding them up and putting them somewhere – anywhere – else.
It’s heartbreaking, really. For the people working in the most common service sector occupations in the state and trying to get by, Nevada is a tax policy basketcase. But policymakers pretend it isn’t. Because that’s the Nevada way.
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