Editorial: Keeping taxes low will keep Nevada prosperous

Welcome to Nevada

It is called voting with your feet.

From July 1, 2017, to July 1, 2018, Nevada’s population grew by 62,000 people to more than 3 million — a growth rate of 2.09 percent, the fastest in the nation. This included a net migration of 48,000 people 

Many of them came from neighboring California, with its high taxes, high housing costs and burdensome regulations.

So, let that be a lessen to our newly elected Democratic Gov. Steve Sisolak and the Democratic majorities in the state Senate and Assembly, which will be in session in a matter of weeks. 

According to The Wall Street Journal, the eight fastest-growing states by population last year were Nevada, Idaho, Utah, Arizona, Florida, Washington, Colorado and Texas. What do these states have in common? Relatively low taxes and business friendly government policies, a Journal editorial noted. Nevada, Texas, Washington and Florida have no income tax, for example. 

Then there is California. Since 2010, a net 710,000 people have left California for other states.

High-tax states Illinois and Connecticut have actually lost population as people flee.

According to the Tax Foundation’s latest figures, California has the 10th highest state and local tax burden in the nation at $5,842 per capita. This compares to Nevada’s rank of 29nd at $4,099 per capita. It should be noted that three years earlier, prior to some recent Republican-backed tax hikes, Nevada ranked 43rd lowest. 

In an article in The Wall Street Journal in 2009 under the headline, “Soak the Rich, Lose the Rich,” economist Arthur Laffer and WSJ economics writer Stephen Moore updated previous studies and found that from 1998 to 2007, more than 1,100 people every day of the year relocated from the nine highest income-tax states — such as California, New Jersey, New York and Ohio — mostly to the nine tax-haven states with no income tax — including Florida, Nevada, New Hampshire and Texas.

Laffer and Moore determined that over that period of time the no-income tax states created 89 percent more jobs and had 32 percent faster personal income growth than the high-tax states.

“Dozens of academic studies — old and new — have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses,” Laffer and Moore concluded.

Federalism allows the states to compete for prosperity. Let’s hope our lawmakers take heed and act accordingly.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

Newspaper column: Why Nevada must hit the brakes on taxes

WSJ illustration

It’s called voting with your feet.

A remarkable number of well-heeled Americans are doing just that, and it should serve as a warning to Nevada voters and candidates as we enter an election year. Though Republican governors in recent years have shepherded through the Legislature record-high tax increases, Nevada still fares fairly well in comparison to other states when it comes to the tax burden borne by citizens of the Silver State.

According to the Tax Foundation’s analysis of state and local tax burdens per capita for fiscal year 2012 — which is after Gov. Kenny Guinn’s billion-dollar tax hike but before the $1.5 billion tax hike pushed by Gov. Brian Sandoval — Nevada ranked 43rd lowest in the nation, while neighboring Taxafornia ranked sixth highest.

Nevada tax collectors grabbed 8.1 percent of the state income through state and local taxes or $3,349 per capita. Meanwhile, California snatched 11 percent of state income or $5,237 per capita.

Perhaps that explains why, according to Internal Revenue Service data on taxpayer migration, from 2014 to 2015 about 10,500 Nevada taxpayers moved to California, while 17,700 California taxpayers moved to Nevada. Even more telling is the fact that the Californians fleeing to lower-taxed Nevada averaged $91,000 in gross adjusted income, while the Nevadans heading to California averaged only $47,400 in adjusted gross income.

It seems people with higher income have a tendency to find ways to keep more of it for themselves.

From 2014 to 2015 Nevada netted an increase in total adjusted gross income reported to the IRS of $1.43 billion. Of that, $1.1 billion came due to the influx of Californians changing residencies.

An analysis of a sampling of that IRS data shows the California-Nevada migration pattern is no anomaly.

In that one year, the state of New York, which has the highest state and local tax burden of any state at 12.7 percent of income and $6,993 per capita, lost $4.4 billion in income.

No. 2 highest Connecticut lost $1.3 billion in income. No. 3 highest New Jersey lost $2.46 billion. No. 5 Illinois lost $3.47 billion. No. 6 California lost $2.09 billion.

Meanwhile, state income tax-free Texas, ranked 46th lowest, added $3.61 billion, and state income tax-free Florida, though only 34th lowest, added $11.65 billion. The latter might have something to do with weather as well, since $2.62 billion of that came in from former New Yorkers, $1.49 billion from former New Jersey residents and $1.47 billion from former Illinoisans.

The New Jersey residents who moved to Florida had an average income of $121,000, while Floridians moving to New Jersey averaged $72,500.

This is hardly surprising nor a new phenomenon. In an article in The Wall Street Journal in 2009 under the headline, “Soak the Rich, Lose the Rich,” economist Arthur Laffer and WSJ economics writer Stephen Moore updated previous studies and found that from 1998 to 2007, more than 1,100 people every day of the year relocated from the nine highest income-tax states — such as California, New Jersey, New York and Ohio — mostly to the nine tax-haven states with no income tax — including Florida, Nevada, New Hampshire and Texas.

Laffer and Moore determined that over that period of time the no-income tax states created 89 percent more jobs and had 32 percent faster personal income growth than the high-tax states.

“Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair?” they asked. “No. Dozens of academic studies — old and new — have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.”

A recent WSJ editorial noted that billions in income are still flowing out of New York, New Jersey and Connecticut and into Florida.

“As these state laboratories of Democratic governance show, dunning the rich ultimately hurts people of all incomes by repressing the growth needed to create jobs, boost wages and raise government revenues that fund public services,” the editorial concluded.

Voting with the feet is sure to increase since the recent tax reform limits federal income tax deductions for state and local taxes.

Let this be a lesson for Nevada. Chase the rich, they’ll run away.

A version of this column appeared this week in many of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel and the Lincoln County Record — and the Elko Daily Free Press.

Those who fail to remember history … will see their life savings wiped out

Foreclosure sign in Las Vegas (R-J photo)

When your life savings disappear when the bubble bursts again, who ya gonna blame? But what difference does it make then?

Heritage Foundation fellow Stephen Moore has an interesting — and all too familiar — lede on one of his two columns posted online Friday.

Moore tells of his 13-year-old son talking at the dinner table about how Franklin Roosevelt ended the Great Depression. That’s what his history book says. “Of course, the New Deal exacerbated the pain and financial devastation of a stock market crash, and unemployment lingered in double digits for a decade after Roosevelt was elected until the start of World War II. We get this kind of rampant revisionism because the left writes the history books — which they are doing right now,” Moore morosely relates.

He goes on to note how the Great Recession is being blamed on greedy bankers and a lack of regulation, and now Ben Bernanke in the Wall Street Journal is claiming he saved the economy with $3 trillion in quantitative easing and zero interest rates, though this is what actually created the crash.

“As my fellow Heritage colleague Norbert Michel and other scholars have thoroughly documented, the crash of 2008 was caused by government policies and regulatory failure, including easy money policies that flooded the markets with debt,” Moore writes. “Within a decade, these policies led to preposterous mortgage loans being issued, and massive over-leverage of government, companies, and households.”

Easy credit caused housing prices to balloon until they burst in a foreclosure crisis.

In a separate column on the same theme in Investor’s Business Daily, Moore points out that Fannie and Freddie are again guaranteeing mortgages with down payments as low as 3 percent — “the same subprime mortgages that crashed eight years ago. The housing lobby demands it, and Congress complies. So taxpayers are back on the hook with the same Fannie and Freddie policies that required $150 billion in bailouts.”

The blame game is easy to play after the fact, but the problem is that no one is learning from the history just what caused the problem and acting to prevent a reoccurrence.

Here is a FactCheck.org run down from 2008 trying to explain what caused the Great Recession — a partial list at best:

  • The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.

  • Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.

  • Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.

  • Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.

  • The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.

  • Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.

  • Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.

  • Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.

  • The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.

  • An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.

  • Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

Sound familiar?

They left out federal government debt.

In 2008 the debt was $10 trillion. Now it is $18 trillion, but low interest rates are protecting Obama and foisting the problem onto the next administration, possibly a Republican one, to take the blame. Obama wants to raise the debt ceiling and have Congress let him write a blank check.

Even Donald Trump, whose crystal ball is often clouded, sees the problem ahead. He told The Hill recently a crash is coming. “You know who gets hurt the most? People who practice the American dream and did what should have been the right way — the people that went through 40 years of their life and saved a hundred dollars every week …” Trump said. “They worked all their lives to save and now what happens is they’re being forced into an inflated stock market and at some point they’ll get wiped out.”

Moore concludes:

“The point is that government and politicians have no learning curve. All of the conditions of financial wreckage are reappearing. The presidential candidates should start warning voters that Washington is rebuilding another financial house of cards.

“If they don’t, when the financial crash comes and Americans see their life savings disappear, the media and the history books will again blame conservatives for the destruction from the rampant financial negligence of government.”

 

Trump voters will not listen to reason

Frank Luntz (AP photo)

Never let the facts get in the way of your faith.

After a focus group put together by Republican pollster Frank Luntz was unshaken in its devotion to Donald Trump despite being shown videos of his flip-flops and outrageous tantrums, Luntz was shaken. “My legs are shaking,” Luntz actually said.

It appears a fairly large segment of those who claim to be Republican primary voters (more than 20 percent, according to most polls) don’t want a leader or a government that will get out of their way and leave them free to conduct their affairs as they see fit, but, instead, pine for a messiah or someone with star-power.

According to a Time account of Luntz’s grilling of Trump faithful:

The focus group watched taped instances on a television of Trump’s apparent misogyny, political flip flops and awe-inspiring braggadocio. They watched the Donald say Rosie O’Donnell has a “fat, ugly face.” They saw that Trump once supported a single-payer health system, and they heard him say, “I will be the greatest jobs president God ever created.” But the group — which included 23 white people, 3 African-Americans and three Hispanics and consisted of a plurality of college-educated, financially comfortably Donald devotees — was undeterred.

At the end of the session, the vast majority said they liked Trump more than when they walked in.

They stuck with the mercurial Trump no matter what he says or does or how often he bobs and weaves on his stances.

Luntz concluded, “Donald Trump is punishment to a Republican elite that wasn’t listening to their grassroots.”

No, Trump is just one of those people who is famous for being famous and too many voters will blindly follow.

As Stephen Moore and Lawrence Kudlow point out in an Investor’s Business Daily op-ed today, protectionist Trump would be worst Republican president since Herbert Hoover, whose Smoot-Hawley tariffs helped launch the Great Depression.

“A draft of Trump’s 14-point economic manifesto promises that, as president, he would ‘modify or cancel any business, or trade agreement that hinders American business development, or is shown to create an unfair trading relationship with a foreign entity,'” they write, noting that tax cuts and regulatory relief, not trade barriers, will solve the nation’s competitiveness deficit.

Perhaps it is not just the voters who want someone to do all the heavy lifting. Even Congress has punted on its responsibilities, as Bill Wilson points out on the same page of IBD.

Tennessee Republican Sen. Bob Corker recently spelled out his opposition to Obama’s Iran nuke deal in a Washington Post op-ed piece. As Wilson notes, it was Corker who cut the deal that will require both houses of Congress to turn down the treaty by a veto-proof two-thirds majority, a near impossibility, instead of the constitutional requirement that two-thirds of the Senate must approve it.

“But for the past 100 years, Congress has frantically handed its powers, rights and prerogatives over to the executive branch. In so doing, they are rendering themselves impotent and meaningless,” Wilson states.

Nobody wants to think for themselves or take responsibility.

After the focus group session, Luntz said, “There’s like an alternative universe.”

Donald Trump (AFP-Getty Images photo)

 

How to fix the Social Security debacle

I kept thinking this week as Washington bureaucrats celebrated the 80th birthday of Social Security that I should point out how the whole thing is a big Ponzi scheme, as I did in 2009. Eighty years ago every retiree was supported by 40 workers, but soon that ratio will be 2 to 1.

Sen. Harry Reid says Social Security is just fine, though in 1980 he said the trust fund was being embezzled.

Stephen Moore beat me to it with today’s op-ed in Investor’s Business Daily. “From the moment Franklin Roosevelt created Social Security in 1935, the system was set up as a classic Ponzi scheme,” he writes, citing the worker to retiree ratios.

Moore not only points out the problem, but he offers a fix:

There are options to fix the program, but they’re all very bad for today’s and tomorrow’s workers. Democrats want to raise the tax — and take even more money from workers’ paychecks. Republicans, like New Jersey Gov. Chris Christie, want to cut benefits. Anyway you cut it, young workers will be asked to pay more in and get less out.

Another fix that would forever end the Ponzi scheme and provide today’s young workers with higher, not lower benefits. Give them the option of putting 10% of their 12.6% payroll tax dollars into an individual account that’s invested in an index fund of all stocks.

At historic rates of return, this would give workers a 7% return per year, which would let them retire as millionaires after 40 years of work. They’d receive two to three times more than Social Security promises.

Social Security could still be there as a backstop for those who didn’t reach a minimum benefit, and the feds could issue long-term bonds to pay existing retirees their promised benefits.

 

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