Our economy is bad and getting worse. Recent projections show taxes paid to the state will shrink by about 40 percent.
What that says is our whole economy has shrunk proportionately.
Small and large businesses in Nevada are scaling back, cutting like never before in a desperate attempt to stay solvent. Bankruptcies, defaults, delayed payments, vacancies, layoffs, short weeks accompanied by a climbing sense of desperation grip the business community.
Private businesses provide the bulk of employment, and layoffs as reflected in the unemployment figures are huge. What is generally unacknowledged is the thousands who remain employed but with greatly cut back hours and benefits. Breadwinners who used to expect overtime are grateful now to get a 24- or 32-hour paycheck.
Public workers — government employees — are not quite yet in such desperate straits, but many see it coming. But there is one huge difference.
Taxes: good or bad? Should we increase or cut?
And here is where the bloodbath will start. For the government, taxes are the revenue stream, the water that makes things grow.
For the private sector, taxes are an added burden, a cut, a slice of revenue given up. Taxes, like all expenses, are ideally kept to a minimum.
So, for one, raising taxes is the answer, and for the other, madness. Raise taxes when I am laying off workers, struggling to pay my mortgage, stringing out my creditors?
And here is where paying attention to politics pays off big. The Legislature, the body making the decision, is filled with government workers. The “citizen legislators” the founders envisioned today reads “government employee-legislators.”
The conflict of interest is obvious, and then-Attorney General Brian Sandoval filed a suit in 2006 about it.
But little has changed. And Gibbons, who saw his vetoes overturned even by his Republicans, knows the likely outcome of a special session. Judging from the session just ended in June, raising taxes with token cuts will result.
Regardless, he will be forced to address the budget collapse, so expect the Legislature to reconvene soon.
Politically this will separate the wheat from the chaff. With elections looming, some will undoubtedly be looking over their political re-election-oriented shoulder. Others, term limited out, will in lame duck fashion do as their heart desires.
Expect at the very least tax increases on the least represented group, small business, perhaps even the beginnings of former Gov. Ross Miller’s goal of a business income tax.
As I will show in a future column, government spending has, even after adjusting for inflation and growth, grown substantially in the last decade. Yet Nevada’s economy was so strong the effect was minimal.
But the Nevada economic world is a token of its once robust self.
Can you get blood from a turnip? Should you take blood from a man with almost no pulse?
Ira Hansen is a lifelong resident of Sparks and owner of Ira Hansen and Sons Plumbing.
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