In fact, they’ll make things worse.

First, let’s set the stage: Ralston’s Sunday column in the Las Vegas Sun notes that Nevada has now “slid backwards into third world status” and that he expects things to get even worse.

This is years of inattention and timorousness coming home to roost, with the failure to rely on anything besides gaming and sales taxes causing one of the worst deficits (in proportion to the entire budget, not raw numbers) in the country.

Let’s dissemble these opinions a plank at a time, and subject them to some sunshine.

First, does Nevada rely only on gaming and sales taxes?

The answer, of course, is no. Page three of this document from the Nevada Budget office shows that less than two thirds of Nevada’s state general fund revenue comes from these two taxes. The proportion for Nevada’s local governments is even smaller, as they claim the majority of property tax revenues. Ralston degrades his argument for higher taxation with hyperbole.

Need more documentation?

• California relies on just two tax sources for over 70% of its budget (one, the personal income tax, is exceptionally unpredictable, unstable, and unhinged from California’s underlying economy).
• Arizona relies on just two tax sources for 80% of its budget (see page 21 of the linked PDF document)

Second, does Nevada have one of the worst deficits in proportion to the entire budget, of any state in the nation?

The answer, of course, is no. But before we get into those details, it is important to understand that the size of the budget is merely our plan to spend. It is not determined by figuring out how much our state government needs to spend to “get the job done” - it is instead determined by how much money the state expects to collect over the biennium. In other words, budget deficits are caused by two things: planning to spend too much and collecting less than you planned.

With only one notable exception in Nevada’s recent history, government plans to spend all money it has coming in. Liberals - Ralston included - contend this is not enough money, hence their constant refrain for higher taxes. Conservatives - me included - contend there is no such thing as “enough” money, because government simply spends all of its revenue, no matter what. California has a much, much larger dollars-per-citizen government, and its liberals shriek that there is not enough money. Nevada’s shrieking liberals managed to pull off the largest tax increase in proportion to the budget in our state’s history in 2003, and the second largest of any state in America this decade, and they’re still shrieking that it’s not enough.

But back to specific allegation at hand, that somehow Nevada’s tax structure is so broken that we have the worst “deficit” in America. The Center on Budget and Policy Priorities is a wealthy bigger-government special interest group that has just published a study on current budget deficits in US states.

It says half the states have planned to spend more than they now think they’re going to collect. The average shortfall for those states is about 9% while Nevada’s is just under 8%. Of the 25 with deficits, 7 have a larger percentage deficit than Nevada (including New Jersey). Two of the seven include California and Arizona, opening up the possibility that there are regional influences at play here that have nothing to do with “years of inattention and timorousness” in Nevada, as Ralston suggests.

The bottom line: Nevada’s tax structure reflects the underlying economy of the state better than most other states’ tax structures. If government tax collections are failing to meet projections, it is because Nevada’s people and economy are failing to thrive as much as we’d hoped and planned. It still makes no sense to me to kick them with a tax hike when they’re already down.

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