By:  Doug Busselman, Executive Vice President

The very public exchange of ideas continue on what should be the proper course for Nevada’s elected leaders to take in addressing the state’s budget.  We’ve seen a couple of media accounts, over the past few days, advocating the idea that spending reductions are not the way to go.

December 23rd, J. Patrick Coolican wrote in the Las Vegas Sun http://www.lasvegassun.com/news/2008/dec/23/theres-case-higher-taxes-even-now/
sharing the ideas of economists who support government spending as the best alternative.  They explain that government spending does our economy more of a service than keeping money in the hands of the private sector. 

The general idea is that Government is not as inclined, as the private sector might be, to not spend their money.  The secret to an economic turn-around is to spend, like you can get more (even if that only happens by taking it from somebody else, who actually earned it).  Fred Thompson also understands this truth and helps explain those insights for our benefit http://blip.tv/file/1528079  (Thanks to Hank Vogler, a member of the Nevada Tax Commission, representing Nevada Agriculture to sharing this important link.)

A foundational argument in the article relies on University of Nevada-Las Vegas (UNLV) economist Jeffery Waddoup’s observation that “When we cut spending and, let’s say we lay off teachers, they go on unemployment.  Then they don’t have as much money to spend.  Without money to spend, they don’t support local businesses.  Local business doesn’t have demand for its products and services, so they lay off workers.  Those workers go on unemployment, and so on.”

It’s good to remember that Mr. Waddoup’s example is only an “example” and probably not as much of an economic principle as suggested.  From our experience in watching Nevada’s Legislature over the past 20 years, there is almost no likelihood of teachers being laid off, no matter how much Nevada’s budget is slashed – so justifying increased taxes on this basis is not a very realistic example.

In light of the insights of another university professor on Nevada state spending – (Elliot Parker’s “Comparisons show spending isn’t Nevada’s problem”
http://www.lasvegassun.com/news/2008/dec/21/does-our-state-government-have-spending-problem/ )  – we’re lucky we don’t have as many teachers as other states.  This way our Nevada economy is not as dependent on the spending they (teachers) do – so we won’t have as big of negative consequences for cutting spending.  (Maybe it’s not appropriate to express cynical thoughts, but it does seem interesting to see how closely university-based economists seem to be tracking on the idea that educational payroll is not a place to be looking for state budget reductions.)

The conclusion of the Sun article comes down to the merits of a corporate income tax, based on profits, as being a sound approach.  The imagery of who’s going to pay the tax is also worth noting, with Wal-Mart, out-of-state gold mines and Mercedes dealers in Denver and Toronto all cited as the deserving folks to be given the opportunity to pull out their wallets for the good of Nevada. 

It’s going to be interesting to read the wording for the bill draft to make sure that Nevada-based companies won’t be required to pay the tax – or not be affected – should that tax plan be adopted by our lawmakers.

Our bottom line is that we’d like to see Nevada legislators carefully identify the details of what current state spending is buying. 

Those with an interest and advocates for extra spending should be provided the opportunity to lay out their case, on the public record, stating specifics of where allocations should be directed.  Taxpayers (whether they be Wal-Mart Executives or Wal-Mart Shoppers), should have it explained to them what they get for the money spent. 

This increased level of accountability might go a long way in helping Nevada citizens to have more of a belief that they are getting their money’s worth.