PLAN state director Bob Fulkerson gave the following testimony before the joint meeting of the Assembly Committee on Taxation and Senate Committee on Revenue and Economic Development.
March 5, 2013
We have 2 choices. We can raise the revenue we need to properly fund education, or we can remain on the bottom of the lists for educational outcomes and other indicators of a functional state.
Our schools have been cut by $1billion over the past five years.
And even before these cuts, our education and safety net funding woes were widely known, for decades. In 1950, Colliers Magazine put Nevada on the cover with this headline: “Nevada: Sick, poor fend for themselves, scant attention to education.”
And, for just as long, we have had the solutions to these problems. In 1960, the Legislative Counsel Bureau released a voluminous study entitled “Financing State and Local Government in Nevada”, which suggested Nevada’s tax base was too narrow and stated: “From the standpoint of equity, there are significant elements of regressivity”. The report found “the assertion frequently made in Nevada regarding a simple direct relationship between a ‘favorable tax climate’ and rapid economic growth cannot be defended” (p. 659). Most tellingly, it called for nearly doubling what was then called the “State Gross Receipts Tax” in order to broaden the tax base.
Forty years after that study, the Price-Waterhouse study (“A Fiscal Agenda for Nevada”) found “Enhancement of a state’s economic competitiveness should not be equated automatically with low taxes” (p. 13). It suggested that “a general business tax could be designed to be compatible with the state’s economic development strategy of diversification” (page 13).
Also of note, the report stated: “The net proceeds tax should be supplanted with a severance tax on gross yield to reduce revenue instability and insure all mines pay some tax to compensate for environmental impacts” (page 22). In that respect, we applaud Senator Roberson and Senate Republicans for coming out today in support of SJR 15 and in favor of more fair taxation of the mining industry. But this should not cancel out support for the Margin Tax. We need profitable businesses and the mining industry to step up.
Every session since then experts have debated and studied, with the results the same: Nevada’s tax base is too narrow and disproportionately hurts middle and lower wage workers.
Last month the Institute on Taxation and Economic Policy (ITEP) listed the ten states whose tax systems favor the wealthy most heavily. Alabama barely edged out Nevada for number 10. If the temporary “sunset” taxes had been included, Nevada would have made been in the top 10 most regressive states.
It’s time to promote tax policies like Education First that that promote the greater good and shared prosperity instead of further concentrating wealth in fewer hands.
When the sales/excise tax share of family income is calculated, the lowest 20% of income earners pay 6.0% while the top 1% pay just 0.7% of their income in taxes.
The Margin Tax addresses this inequity and regressivity head on by broadening our tax base.
Our existing tax system has created a Donner Party mentality of primitive survival, even if it means sacrificing our children’s education. And our kids are on to us. At the Sun Youth Forum last year, 82 percent of Las Vegas’s brightest youth said they have no intention of living here as an adult. What does that say about us as a state?
It’s not just education that is suffering because of our state’s dysfunctional tax system. Nevada is among the top three states where the childhood poverty rate has worsened over the last year; 25 percent of our children under the age of 5 live in poverty. If Nevada were to fix its regressive tax system, we could provide pathways out of poverty, including child care, heath care, nutrition and of course, education, and break this cycle forever.
Nevada has the second lowest tax load in the country, according to the Tax Foundation. That might sound great, but if low taxes mean more jobs, why are we leading in unemployment?
Nevada has fewer public workers per capita than any other state. Demand on services is growing, but the number of public workers is shrinking.
Forced austerity by choking revenue through a dysfunctional tax system is a cruel hoax, as Robert Reich recently stated. Cruel because it hurts those who are already suffering the most, and a hoax because it doesn’t work.
The worst thing a state can do in a recession is to weaken the public services that a strong economy needs, like education, health care, transportation, and public safety. If we don’t invest in our schools, put college out of reach for kids, if we fail to invest in our transportation system, then when prosperity returns we won’t be positioned to benefit.
47 other states have enacted a tax on corporate profits. In surrounding states: CA has 8.84%, ID 7.6%, Utah 5%, Arizona almost 7%. And we can’t have a 2% margins tax? Our prices are the same as theirs but they’re getting a whole lot more help in funding their state budgets. We need to stop subsidizing other states.
If we want to avoid having kids share textbooks, try to learn in crowded classrooms in old schools needing repairs, and if we want to keep our best and brightest teachers: we need to fund education properly.
The Margins tax and Education First breaks through the paralysis that has gripped out state for decades. It’s time to do something bold and I applaud the teachers for their leadership.