Optimists and Many Nevadans Continue Tax Fight with Cynical State Politicians

If we share a weakness, it’s our perpetual optimism.

As free-market economists, we often reflect on the amazing achievements of the past 300 years, and doing so, grow sanguine about what people can accomplish when free to create, innovate, produce and exchange with each other mostly free of government interference.

Free enterprise has greatly allowed people to overcome the pervasive squalor, disease and hunger that characterized much of human history prior to the Enlightenment. So, ironically, optimism has become the natural disposition for many practitioners of the Dismal Science, from Milton Friedman and Friedrich Hayek down to us.

Occasionally, real economic insight percolates into politics and imparts a cheerful outlook to leaders who embrace these lessons. Ronald Reagan and Jack Kemp, whose views were informed by study of Friedman, Hayek and others, were notable examples.

In politics, however, one often confronts the downside of human nature. Cynicism, deceit, hypocrisy, corruption, and special-interest dealing are the hallmark tactics of those who don't hold a sanguine view of what people will do with the blessings of liberty.
Passage of a gross receipts tax (GRT) by Nevada's 2015 legislature and governor, and the ensuing fight to repeal it, make a case in point.

In the last election, prominent Republican leaders campaigned vociferously against the GRT on the 2014 ballot. Decades ago, nearly half the states had them, but that number has fallen to just three because they have so many problems.

First, because GRTs are not based on profits, a business can lose money and still be forced to pay. Second, the costs to file a GRT return can be more than the tax itself for many businesses and some families because the accounting is so complex. Finally, GRTs "pyramid" up the supply chain, being assessed at every stage of production.

As other states dumped GRTs in recent decades, Nevada voters agreed in 2014, voting one down by a 4-to-1 margin. It was the most popular choice on the ballot.

What voters didn't know at the time was that many of the same Republican leaders who publicly campaigned against that GRT and, no doubt, benefitted electorally from that opposition, were secretly conspiring privately to create a GRT once the legislature was gaveled into session. Special interests, including some major casino companies, have sought for years to hit non-gaming Nevada businesses with a GRT and have enjoyed backing from public-sector special interests and unions who sought the extra tax revenue.

Republican leaders in the legislature and governor's office saw this as a major opportunity to play political brokers among these special interests and give them what they wanted, despite those politicians’ public representations to the broad electorate just months earlier.

So, working with a dozen good legislators, we developed an alternative budget that would have funded the state's highest priorities, including much of Gov. Sandoval's education agenda, but without new taxes. That plan was buried by legislative leaders after it passed its first hearing with flying colors. Since adoption of the omnibus tax bill, we’ve led the effort to repeal the worst of it, the GRT.

The reactions to our efforts from some Republicans have been ugly and pathetic. In true Alinskyite fashion, they have answered our substantive criticisms not with facts and reason, but with false attacks on us. Gov. Sandoval cynically and hatefully called the referendum to repeal his GRT "a wrongheaded attack on the children and families of Nevada."

The RINO (Republican in name only) the Reno Gazette-Journal opinion section carries to misrepresent and attack real conservative and Republican views, mischaracterized almost everything we've said on the matter and made patently false and laughably absurd accusations against us. A few legislators have spread false claims about our no-tax-increase alternative when we weren’t present to rebut them.

The target of their ire, the referendum to repeal the “Commerce Tax” GRT, would reduce general fund revenue by a mere 1.6 percent while removing a key obstacle to future growth and investment in Nevada. So, why are they sparing no effort to defend it? Because it is the key to their plans for future massive tax hikes.

The same reason that we perpetual optimists and the majority of Nevadans intend to defeat it.

Ron Knecht is Nevada’s elected Controller. Geoffrey Lawrence is Assistant Controller.