EDITORIAL: The high costs of unfair tax hikes
Punitive, targeted increases hurt economy's competitiveness
Although Nevada's political establishment has done an admirable job restraining its unabashed desire to raise state taxes, the electorate should know that every government's collective will power has its breaking point. News from around the country shows it's just a matter of time before someone proposes punitive, unfair tax hikes -- and before some of these horrible ideas become law.
In Pittsburgh, workers and businesses already hammered by the economic slowdown have one more reason to cry in their beer: a 10 percent tax on all served alcoholic drinks. Allegheny County expects to collect at least $32 million per year from the levy, enacted to subsidize ... mass transit. So much for the concept of "user pays." Perhaps officials are hoping the locals get so drunk at the neighborhood bar that they have to take the bus home.
In Maine, without any public hearings, the Legislature passed big tax increases on beer, wine and soft drinks to pour more money into that state's universal health care scheme. The legislation's goal is to increase health care availability and affordability, yet it also imposed a 1.8 percent surcharge on paid insurance claims.
Maryland just became the first state to assess the kind of "millionaire's tax" championed by Nevada university system Chancellor Jim Rogers. State lawmakers created a 6.25 percent income tax bracket for filers who earn more than $1 million. Budget officials think it will bring in about $330 million over the next three years, but basic economics tells us these folks will find a way to hang onto their money. "I call it the 'Get Out of Maryland Tax Act,' " said Wall Street Journal editor Stephen Moore.
The Chicago metropolitan area, meanwhile, might be on the verge of a full-fledged tax rebellion. Cook County's sales tax rate is set to jump a full percentage point on July 1. This comes on the heels of six-county sales tax hike imposed by the Regional Transportation Authority on April 1 to increase commuter rail and bus service subsidies. Cook County residents are in line to have the country's highest total sales tax burden, according to the Heartland Institute, while neighboring counties enjoy rates at least 3 percentage points lower.
"We have Costcos equidistant from my house, one in Lake Zurich (Lake County) and the other in Schaumburg (Cook County). Which one do you think people around here are going to go to?" state Sen. Matt Murphy, R-Palatine, told the Heartland Institute's Budget & Tax News. "They're putting us at a competitive disadvantage."
Which is the end result of all tax increases, regardless of whether they're imposed on targeted businesses and products or assessed against every worker or homeowner. States, counties and cities are in perpetual competition with one another to keep businesses, jobs and productive workers from jumping to another jurisdiction that lets them keep more of their own money. It's a huge reason why Nevada's economy has been consistently strong over the past several decades.
Already, some Pittsburgh-area taverns near the Allegheny County line are seeing customers drive a bit farther to avoid the drink tax. Many Maine residents already travel to New Hampshire to avoid steep alcohol and sales taxes; the Maine Legislature just made its neighbor's liquor stores that much more appealing. Maryland and Chicago, meanwhile, are about to learn first-hand what happens when you go to a particular well too often.
As Nevada lawmakers work to address this state's budget woes, and whispers for various "fee" increases grow louder, they'd be wise to remember these lessons.
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