Low-income penalty

There is a 6.6 percent difference in the amount paid in state and local taxes by families at the top of Nevada’s economy when compared to those at the bottom, according to the Institute on Taxation and Economic Policy (ITEP), a Washington, D.C., research organization.

The 20 percent lowest income Nevada families pay 9 percent of their income in local taxes. The top 1 percent pay 2.4 percent.

The study is the latest to characterize Nevada’s tax structure as regressive—that is, as hitting lower income Nevadans the hardest. Or to put it another way, the richer you are, the less you pay.

But no matter how often it is described that way, the issue never seems to get traction in the state’s politics.

“Well, because those who suffer the most from regressiveness don’t vote,” said political analyst Fred Lokken. “They have the lowest turnout in the country.”

Jeri, a working mother in Sparks, stops at the Rainbow Market on Rock Boulevard on the Friday her paycheck comes out to fill her tank.

“I always hope that one tank lasts for the two weeks of my pay period,” she said.

She shops at the cheapest places she can find for retail goods, uses no air conditioning in summer and keeps the heat shut off as often as her children’s health allows it in winter, and actually uses something that is increasingly rare—a clothesline.

“I know about that [sales tax regressiveness]. I heard about it in government class in high school. I always figured it would get fixed when people realized it. I gave up on that a long time ago.”

“Yes, I vote,” she said. “But I would expect them to represent my needs even if I didn’t.”

She may be expecting too much.

“We’ve embraced the notion of dropping property taxes and making them as low as possible,” Lokken said.

That puts more and more pressure on sales taxes.

“We know the sales tax is regressive, and it’s highly sensitive to recession,” he said. “Pragmatism creeps in. If you’re going to put a bond issue on the ballot, good luck. For whatever reason, sales tax seems to be the tax that they can get away with. And some legislators are proud—’We protected the wealthy people.’”

It’s not always the lobbyists for the rich and powerful who saddle low-income people with higher sales taxes. When the first sales tax was created in Nevada in the 1950s, it was done under pressure from teachers’ lobbyists, whose own constituency would be hit hard by the tax.

The same thing happened in 1997 when labor union leaders joined businesspeople to support a sales tax hike to pay for a Colorado River pipeline in southern Nevada and floor control and a railroad trench in northern Nevada.

And Democrats were part of the support for a Republican near-doubling of the sales tax in 1981, the largest sales tax hike in state history.

“In essence you’ve got a small group of people turning out,” Lokken said. “The ones who do vote make sure the system stays the same.”

In some narrow situations, that’s particularly true. “Sparks, especially,” one activist said. That’s surprising because at one time Sparks, as a union stronghold, was very suspicious of sales taxes. These days, it is known as the Mecca of STAR bonds, which allow some businesses to, in effect, keep most of the sales taxes they generate, thus putting greater pressure on the taxes paid by residents who pay their full share.

Columnist and editor of NevadaLabor.com Andrew Barbano said Nevada is like a big company town.

“Nevadans have a bad case of political co-dependency,” he said. “We seem to enjoy being hurt by the ones who say they love us … the casino owner who gladly cashes miners’ paychecks, then buys them a few drinks on Friday night. … Nevadans have seen their governments pass out corporate welfare like candy and condoms. Why clutter your mind considering a tax increase, or a shift toward tax equity, or any tax-tinkering if you have hard evidence that the money will just be handed to some billionaire or corporate predator that doesn’t need it?”

The state also has a tradition of trying to fund government with tourism dollars.

“Our philosophy here in Nevada is always to have our taxes paid by tourists,” Lokken said, pointing out that this makes the state highly vulnerable when hard times come.

In recessions, which have occurred approximately every 10 years for the past four decades, the state has endured four major budget crises. When the revenue from sales taxes take a dive, services that working people have paid for in good times are not always available because of shortfalls. And it’s not the wealthy who get slammed with the financial impact when services are rebuilt as good times return.

Barbano said the sales tax also has trouble getting into the mainstream media because it’s not telegenic.

“Wild horses, gun control, potholes and abortion are easy, either/or issues, suitable for television,” he said. “Taxes mean talking heads often speaking unintelligibly. Flip over to Wheel of Fortune.”

Democrats in other states have often pushed sales taxes as an issue of economic populism. But in Nevada, if they are interested in it at all, they want the press to go first. “I never see stories about the high sales tax anymore,” one member of the Washoe County Democratic Central Committee said.

Democrats are not likely to champion low-income voters in part because of their incessant “middle class” mantra and in part because the party is now so heavily corporate-funded.

“I once thought that an independently wealthy and liberal white knight could take on the system as an advocate of the weak and the small,” Barbano said. “I have been disappointed for more than 40 years because, to paraphrase Jefferson Airplane, the White Knight somehow always ends up talking backwards.”

For many years in the Nevada Legislature, no sales tax increase could get through because North Las Vegas Assemblymember Robert Price chaired the Assembly Taxation Committee and would stop any such hike. Price was one of the few Democrats who took an anti-sales tax stance. But then Assembly Speaker Joe Dini dumped Price as chair in favor of David Goldwater in order to clear the way for the train trench/water pipeline sales tax hike.

The ITEP survey excluded elderly taxpayers. ITEP spokesperson Matt Gardner said that was “because many states treat seniors very differently from non-seniors for tax purposes. For example, Illinois taxes most income at a 5 percent rate, but completely excludes retirement income such as pensions and Social Security, which, of course, are enjoyed primarily by seniors. So if we included seniors in our analysis, that would make the overall effective income tax rate in Illinois appear lower than it really is for most families. In situations like this, we think including seniors would muddy the waters more than anything else.”