One Sound State, Once Again

Comprehensive fiscal reforms to again make Nevada strong, prosperous and free

By Geoffrey Lawrence
  • Tuesday, June 1, 2010
Executive Summary 

In the middle of the Great Depression, while other states suffered shortfalls and communities used scrip rather than actual currency, the State of Nevada ran a budget surplus. It lasted into the mid-1940s.

Proud of the Silver State's unique fiscal situation, state and business leaders launched a nationwide promotional campaign intended to attract wealthy investors to the state. The "One Sound State" project advertised Nevada as a state with "no income tax, no inheritance tax, no sales tax, no tax on intangibles, but with a balanced budget and a surplus."

By 1939, the state surplus was so large that the property tax rate — raised by the 1937 legislature — was cut by 20 percent. The San Francisco Chronicle editorialized, "Unbelievable, but it is true. These people just do not belong in the United States."

Today the State of California is again issuing scrip — called "registered warrants" now — and Nevada clearly needs a new model for fiscal rectitude.

The state's current legislative leadership, however — operating as the Interim Finance Committee — has already signaled its intent to ignore the state's need for comprehensive fiscal reform and instead simply pursue a quantum increase in the state tax burden, while billing it as a comprehensive review of the state revenue structure. Like each of its predecessors over the last 20 years, however, this legislature's tax study was structured to ignore genuine fiscal reform issues and instead merely provide cover for lawmakers out to transfer private-sector resources to the powerful, organized, tax-consuming groups that get them elected.

Nevertheless, Nevada seriously needs genuine, revenue-neutral fiscal reforms, and this report seeks to fill that vacuum. It analyzes the actual volatility of Nevada's current taxes — and the taxes lawmakers keep signaling they want. It covers important tax-related issues, such as achieving economic efficiency and tax equity, while reducing compliance costs as well as tax-induced distortions in economic behavior. And it reveals why comprehensive fiscal reforms for Nevada should include:

• Eliminating the modified business tax;
• Eliminating the insurance premium tax;
• Broadening the sales tax base and reducing the statewide sales tax to 3.5 percent;
• Implementing priority-based budgeting; and
• Implementing spending controls that limit state spending growth to the rate of inflation plus population increase.

Download file Download the full study


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