Editorial: Democrats flunk math with false claims about refunds

The Associated Press reported recently that Democrats have seized on the fact that the average income tax refund is smaller this year “as proof that the Republican-written tax law hurts the middle class.”

Noting the smaller refund checks, House Speaker Nancy Pelosi wrote on her blog, “People have already taken to social media, using the hashtag #GOPTaxScam, to vent their anger. Many blame President Trump and the Republicans for shrinking refunds. Some on Twitter even said they wouldn’t vote for Trump again after seeing their refunds slashed.”

By this past weekend the hashtag #GOPTaxScam had shown up online 100,000 times. 

In fact Democratic presidential candidate Kamala Harris, a U.S. senator from California, tweeted, “The average tax refund is down about $170 compared to last year. Let’s call the President’s tax cut what it is: a middle-class tax hike to line the pockets of already wealthy corporations and the 1%.”

The liberal website Huffington Post reported, “The average refund check paid out so far has been $1,865, down from $2,035 at the same point in 2018, according to IRS data. Low-income taxpayers often file early to pocket the money as soon as possible. Many taxpayers count on the refunds to make important payments, or spend the money on things like home repairs, a vacation or a car.”

The story noted in passing that the tax code changes meant that in some cases not enough money was withheld by employers. But nowhere did it note that in the vast majority of these cases the total tax bill for 2018 is less than the prior year. People just got to kept it with each paycheck and did not make interest-free loans to the federal government.

Democrats are seizing on something all right, but it is misdirection and bad math.

Though refunds are about 8 percent lower than a year ago, the Tax Policy Center reports income tax payments are being reduced $1,600 on average, thus increasing after-tax income by 2.2 percent. The center noted that about 65 percent of households will get tax cuts averaging $2,180, while about 6 percent will see a tax increase averaging $2,760.

Since people were paying less in taxes, less was withheld.

Nicole Kaeding, director of federal projects at the Tax Foundation, was quoted by National Public Radio as saying, “Don’t judge your taxes by your refund. That’s only one part of the conversation,” adding, “Ideally, you don’t actually want to receive a large refund. Because what you’ve done is given the federal government an interest-free loan. Instead, what would be better is to adjust your withholdings so you get more take-home pay in every paycheck.”

But never let the facts get in the way of a Democrat trying pick your pocket. 

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.

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.

Newspaper column: Tax reform debate falls down a rabbit hole

If you are trying to follow the debate in Washington about tax reform in its various and evolving iterations, you are likely to come away muttering: Figures don’t lie, but liars can figure.

This past week the House passed its version of tax reform by a vote of 227-205 with not a single Democrat voting aye. The 13 Republicans who voted nay on the Tax Cuts and Jobs Act are mostly from high tax states such as California, New York and New Jersey, where constituents would no longer be able to deduct high state and local income and sales taxes.

Also this past week and on a party line vote of 14-12, the Senate Finance Committee, where Nevada Republican Sen. Dean Heller is a member, passed a slightly different tax reform bill with the same name.

Nevada’s Democratic delegates to D.C. were all singing from the same hymnal.

Democrat Rep. Ruben Kihuen, who represents northern Clark County and the southern portion of rural Nevada, declared the House bill “nothing more than a handout to big corporations and the wealthiest Americans that unfairly sticks working and middle-class families with the bill.”

Kihuen said the bill also will increase taxes by an average of $680 for 113,000 middle- and low-income Nevada families.

This figure apparently comes from the left-leaning Institute on Taxation and Economic Policy (ITEP), which calculated that in 2027 about 11 percent of Nevadans in the lowest 60 percent of earners would see taxes increase by $680. Kihuen neglected to mention that in that year 89 percent of those Nevadans in that earning range would still have a tax cut of $490, according to ITEP.

Nor does he mention that ITEP calculates that in 2018 only 3 percent of those lower tier earners would have a tax hike of $460, while 79 percent would see a tax cut of $610. How these number were derived is not explained.

The average tax cut for 84 percent of all Nevadans in 2018 would be $2,670, according to ITEP. Yes, the tax cut for the richest 1 percent would amount to more than $100,000. The poorest 20 percent would only save $270.

Democrat Sen. Catherine Cortez Masto chimed in by claiming the House bill would raise taxes on 36 million working and middle class families, without bothering to mention that in 2017 there were more than 145 million IRS tax returns filed.

Democrat Rep. Dina Titus of Las Vegas lamented, “Of the 50,000 constituents in my district who itemize their taxes, the majority earns less than $75,000 per year.” She failed to note that the standard deduction is being doubled and thus eliminates the need for itemizing for many of them. Nor did she mention that only 25 percent of Nevadans’ tax returns are itemized.

First-term Democrat Rep. Jacky Rosen of Henderson, who has already announced she is a candidate for Heller’s Senate seat, wailed, “This partisan plan adds $1.5 trillion to our deficit and could trigger a $25 billion cut from Medicare as well as further cuts to other programs, unfairly shifting costs onto Nevadans who rely on commonsense tax reliefs policies that help those saddled with high-cost medical expenses, students struggling to pay off their college loans, and teachers trying to buy basic supplies for their classrooms.”

But Republican Rep. Mark Amodei, who represents Northern Nevada, counters that such deficit claims fail to take into account the anticipated growth in GDP that should increase wages and jobs and actually grow federal tax revenue.

“Even a 1% increase in GDP generates about $3 trillion in revenue over 10 years — more than covering the anticipated $1.5 trillion deficit,” Amodei reported in an email. “The accuracy of this projection can be further evidenced by going back to the Clinton Administration where GDP growth was at 3.9% – the highest it’s ever been under the last five administrations – and the government was operating under a surplus.”

The congressman also pointed out that for those in his district with an annual income of around $64,000 the federal tax cut effect is more than $1,200 a year with the new brackets and increased standard deductions.

Amodei and Sen. Heller both cited the calculations by the Tax Foundation which estimates that both the House and Senate bills could bring 8,000 additional jobs to Nevada and boost middle-class income by $2,500 a year.

What are you going to believe? Historic precedence or cherry-picked examples of a handful of outliers?

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.

Your money goes further in Nevada

According to the Tax Foundation, a buck goes further in Nevada than in some other states, especially California.

So, Californians bring your money to Nevada to spend. Just don’t throw it down on the felt or drop it in a slot machine. That’s not spending.

Nevada losing ground compared to rest of nation in reaching Tax Freedom Day

 

Tax Foundation map showing Tax Freedom Day in each state.

As Andy Koenig, senior policy advisor at Freedom Partners Chamber of Commerce, recounts today on the editorial page of the morning newspaper, your IRS taxes may be due today but you won’t be free from paying taxes until April 21 in Nevada.

That’s because, as the Tax Foundation calculates, until then, on average, every dime you earn goes to pay federal, state and local taxes.

“In calculating Tax Freedom Day for each state, we look at taxes borne by residents of that state, whether paid to the federal government, their own state or local governments, or governments of other states,” Tax Foundation’s methodology statement reads. “Where possible, we allocate tax burdens to each taxpayer’s state of residence.”

Nationally, tax Freedom Day falls on April 24, a full 15 days later than in 2010.

Nevada’s Tax Freedom Day is a full 19 days later than in 2010 — must have been something our elected officials did. And that doesn’t yet take into account the $1.4 billion Nevada lawmakers jacked up taxes in the 2015 Legislature that are just now taking effect.

Koenig relates the federal bite being taken out of our income:

Tax Freedom Day keeps getting pushed back because the government keeps taking more of our money. This year, Washington, D.C., is expected to rake in a record-breaking $3.36 trillion in tax revenue, $115 billion more than it did last year.

That still won’t be enough to satisfy D.C.’s spending addiction. Washington will once again spend more than it brings in this fiscal year, adding $534 billion to the already massive federal debt. Over the past two decades, both Republicans and Democrats have made countless promises while leaving you and me with the bill. The result has been out-of-control federal spending, which has fueled an unprecedented rise in the national debt from just over $5 trillion in 1996 to nearly $20 trillion today.

The wasteful spending is getting worse, too. Last month, the federal government’s fiscal watchdog — the Congressional Budget Office — estimated that D.C. deficits will grow every year for the foreseeable future. The annual shortfall will surpass $1 trillion within six years.

Tax Foundation calculates we pay more in the taxes than for food, housing and clothing combined.

If you don’t pay your taxes, you will be jailed and provided food, housing and clothing.

 

 

Thankful you live in low-tax Nevada? Not so fast, chief

Tell me again why Nevada needs to increase state spending by $1.3 billion and increase taxes to pay for it.

We’re just not taxed enough, our Republican Gov. Brian Sandoval insists, along with a majority of the state Senate, including all but four Republicans.

The Tax Foundation has come out with its 2015 Tax Freedom Day stats, and it turns out Nevada’s tax burden in federal, state and local taxes as a percent of total income ranks 26th in the nation — right in the middle. That means it takes Nevadans until April 20 this year — 110 days into the year — to start earning money we can keep, instead of paying taxes. Nationally, Tax Freedom Day is April 24.

“Americans will pay $3.3 trillion in federal taxes and $1.5 trillion in state and local taxes, for a total bill of more than $4.8 trillion, or 31 percent of the nation’s income,” the Tax Foundation calculates, noting that the tax burden in 1900 was 5.9 percent of income.

Americans will spend more on taxes in this year than on food, clothing, and housing combined. If federal borrowing were included it would take another 14 days to cover the government tab.

 

Sandoval lashes out at criticism of tax without rebutting a single fact

Gov. Brian Sandoval engaged in the lowest of political treachery and deception, launching into an ad hominem attack on the Tax Foundation’s analysis of his business license fee (BLF) based on graduated gross receipts.

Sandoval said of the study commissioned by the Las Vegas Metro Chamber of Commerce:

“The report issued today by the Las Vegas Metro Chamber of Commerce’s Tax Foundation is utterly irresponsible, intellectually dishonest and built upon erroneous assumptions. I know I am not alone in expressing my disappointment in the Chamber’s judgment especially for an organization that repeatedly claims to want to help move Nevada forward. Moreover, this act sits in direct contradiction to what the Chamber’s leaders have expressed to me on several occasions privately in my office. The only good to come from this stunt is that for those of us who are working in good faith to solve Nevada’s education challenges, it removes all doubt about where the Las Vegas Chamber stands. I believe the Chamber’s leaders have done their membership a terrible disservice and have harmed the credibility of an organization that purports to stand for education.”

The statement is all bluster and void of facts. He names not a single erroneous assumption. He makes no cogent argument, instead resorting to salacious name calling.

On the other hand the Tax Foundation study was dripping with facts and figures.

Gov. Brian Sandoval (Reno Gazette-Journal photo)

It is Sandoval who is probably engaging in erroneous assumptions. Both the Tax Foundation and the Nevada Registered Agent Association both say Sandoval’s estimation that the BLF will eventually net $250 million a year in revenue is wildly inflated. The agents say it is overstated by $65 million a year and the Foundation says it may be as much as $100 million. Both say the governor overstates how many will pay the tax.

The Foundation notes the governor projects a growth in the number of business licenses from the present 308,000 to 340,000.

The Foundation cites the agents’ study that estimated a net drop of 124,000 registered businesses in the state and a 55 percent reduction in new filings.

Of course, the spineless Chamber immediately disavowed any knowledge of the study and apologized to the governor for the “tone and tenor” of the study.

The Foundation called the tax a “complex, arbitrary tax that will do long-term harm to Nevada’s economic growth.”

“It will be Nevada’s most complex tax for both taxpayers and tax administrators, with a multi-step method of rate calculation bordering on arbitrary, 67 rates plus cliffs and phase-ins for each one, and unclear guidance for multi-industry and interstate companies,” the study said. “It is also decidedly non-neutral, with stated tax rates deliberately varying widely by industry such that it exacerbates tax pyramiding and likely violates federal prohibitions against discriminatory taxation.”

It also violates the state Constitution’s dictate that taxes be uniform and equal.

To illustrate the unfairness of the tax, the Foundation quotes the Guinn Center as saying: “Under the revised Business License Fee structure, publishing, software, and data processing were grouped into one category and taxed at a rate of 0.276 percent, the fifth highest rate. However, the profitability rate for those industries varies significantly: publishing (12.81 percent), software (4.19 percent), and data processing (0.80 percent).”

That is downright arbitrary and capricious, as well as utterly irresponsible, intellectually dishonest and built upon erroneous assumptions.

In an email responding to the governor’s ad hominem attack, the Tax Foundation listed key facts:

• The proposal would convert the existing flat $200 Business License Fee into a tiered system of 67 revenue ranges for each of 27 industry categories. Additionally, foreign filers and non-employer businesses would pay a flat fee of $400, bringing the total to 29 categories of filers and 1,811 possible flat-dollar-amount tax liabilities.
• The proposal is targeted to generate $250 million per year once fully implemented and is projected to raise $438 million over the first biennium. However, these revenue estimates may be overstated by hundreds of millions of dollars.
• While attempting to mitigate the inherent flaws of gross receipts taxes, the designers of the BLF created a complex tax structure that violates the principles of simplicity and neutrality. The proposal requires significant additional administration costs and compliance burdens, and a quick implementation invites disaster.
• BLF rates are arbitrarily calculated using Texas data from a single year, despite the high likelihood that such data is not representative of Nevada’s economy. BLF rates do not correlate with profitability, resulting in punitive taxes for some and taxation of unprofitable firms.
• The BLF designers incorporated revenue cliffs that result in absurdly high marginal tax rates, reaching as high as 13 million percent. BLF designers concede pyramiding will be a problem, violating the principle of neutrality.
• BLF industry categories were arbitrarily selected and will result in tax arbitrage and economic distortions, as seen in states with similar taxes.
• Texas and Washington, while providing the model for the Nevada BLF proposal, are considering proposals to repeal their analogous taxes.
• The BLF proposal violates the principle of transparency by mislabeling an obvious tax.
• The BLF as proposed likely violates the interstate commerce clause and federal law.

Newspaper column: Study calls for simple and fair taxation

The word that will be buzzing through the halls of the Nevada Legislature like a swarm of bees from February until June will be “taxes” — whether to raise them, create new ones or fix the ones we have.

Our lawmakers would do well to heed the advice in a study by the Tax Foundation titled “Simplifying Nevada’s Taxes: A Framework for the Future.”

Commissioned by the Las Vegas Metro Chamber of Commerce, the 80-page report remains neutral on just how much tax revenue the state needs but rather concentrates on reforming the tax system so that it will ensure Nevada is economically competitive and fair.

“Nevada should consider fixing what is broken with the current tax system instead of pursuing a brand new tax to layer on top of the narrowly based, complex existing taxes,” the Tax Foundation suggests. “A number of elements of the tax system exist only in Nevada, and those in particular should be scrutinized. Changes should address state revenue volatility, be fair, and reduce carve-outs that plague the system.”

In a criticism that should be no surprise to most Nevadans, the study found the state relies too heavily on volatile tourism taxes and in general the tax structure is narrow, complex and inequitable. Its base should be broadened and rates lowered.

Though a number of Nevada’s panoply of taxes — from insurance taxes to car rental fees to real property transfer taxes — come in for criticism, the two that deserve the closest scrutiny are the ones that pick the pockets of every Nevadan — sales and property, which combined generate more than 65 percent of state and local tax revenue.

One of the main problems with Nevada’s sales tax system is that it has failed to fairly reflect Americans’ changing spending habits over the decades. While in the post-World War II era our personal consumer spending was about 60 percent on goods and 40 percent on services, today’s spending ratio is reversed with only about 35 percent going for goods and the rest on services — which Nevada mostly does not tax.

The study suggests that taxing services would be more equitable and stable and allow the overall statewide average sales tax rate of nearly 8 percent to be lowered. But since the sales tax is regressive — taking a bigger percentage bite out of the incomes of poorer families — some services should be exempted, such as medical and hospital care, just as food and medicine are exempt now.

In addition, the study suggests simply repealing the state’s Live Entertainment Tax, which has a labyrinth of exemptions and exclusions that make it expensive and nearly impossible to enforce, and applying the sales tax to such events. For example, some of Nevada’s biggest events are specifically and questionably exempted from the Live Entertainment Tax — Burning Man, minor league baseball, the Electric Daisy Carnival and NASCAR’s Nextel Cup series.

As for property taxes, the Tax Foundation found Nevada’s system to be unique in the nation. No other state assesses property values for tax purposes the way Nevada does.

“Unique features include a depreciation factor and a ‘ratchet’ effect in the property tax cap that has presented challenges for local governments,” the report says. “Although the concerns that prompted these features remain valid, the resulting system is cumbersome, convoluted, and unstable, especially in the wake of a recession.”

The “ratchet” referred to is the law that was enacted during the state’s boom years when property values were escalating exponentially every year. To curb the impact, lawmakers capped the annual increase in property taxes at 3 percent for residences and 8 percent for commercial property. Since prices fell during the recession, state and local governments are lagging in revenue recovery due to the caps.

But the biggest difference in Nevada is that the tax is based on replacement value rather than market value. In addition, Nevada is unique in applying a depreciation factor on property even though property seldom actually depreciates. The 1.5 percent annual depreciation for up to 50 years means a person living in a newer house than a neighbor with an older house of the same value may be paying considerably more in taxes.

The Tax Foundation’s analysis should be closely studied by our lawmakers, not as a way to increase taxes, but as a means of achieving fairness, stability and predictability.

In his State of the State speech Gov. Brian Sandoval ignored everything the study recommended and made some unequal taxes even more unequal.

 A version of this column can be found online at The Ely Times, Mesquite Local News and the Elko Daily Free Press.

Nevada still on the short end of the stick when it comes to federal assistance

 

There are only six states whose states general revenue rely less on federal funding than Nevada, according to calculations by the Tax Foundation, and many of those states have high state and local taxes.

Tell me again how our powerful Senate majority leader has been bringing home the bacon.