‘One Sound State’ redux

Mention “One Sound State” to a Nevada newcomer, and you’ll likely get a blank stare.

Mention it to someone who grew up here—Gov. Jim Gibbons, say—and you may see his eyes light up.

Gibbons, in fact, mentioned it last week while testifying at the Nevada Legislature on his energy plan.

One Sound State was quasi-official Nevada tax policy cooked up by local millionaires, state officials and journalists. It lasted from the late 1930s to the early 1950s. Few people today remember it, but it has taken on a glow of nostalgia that conceals its weaknesses. There have been so many expressions of wistfulness toward it lately that a historian (Guy Rocha) and a reporter (Ed Pearce) have been writing about it.

If there was a launching point for the One Sound State campaign, it might be 1936, when the Nevada State Journal and the First National Bank of Nevada under the leadership of the bank’s former president, Gov. Richard Kirman, sent out a magazine-format booklet to 10,000 millionaires around the nation.

The idea was to attract wealthy people to the state by publicizing its relative tax-free environment. Publicity material cited points like these:

• A balanced budget.
• No retail sales tax
• No corporation tax
• No state income tax
• No inheritance tax
• No intangibles tax
• No gift tax
• The greatest per capita wealth ($5,985)

The booklet contained essays from Nevadans and immigrant Nevadans attesting to the state’s allure. There was little pretense of altruism—Republican leader Melvin Jepson wrote that part of Nevada’s allure was its mostly white population. Newspapers were bribed by exempting them from a tax if they published One Sound State material (using a tax to advance an anti-tax program was a titillating notion).

Resident millionaire Norman Biltz recruited some of his industrialist pals to the state to establish technical residences. The campaign claimed that 500 millionaires moved to the state, which is almost certainly exaggerated. But some did, such as car maker Errett Cord, Democratic National chair John J. Raskob, yeast manufacturer Max Fleischmann, steamship magnate Lewis Luckenbach, Singer Sewing Machine’s Arthur Bourne. Some people, such as Christian Arthur Wellesley, were counted among those bagged, though they established themselves in Nevada before the campaign began. Wellesley, in fact, wrote an essay in the booklet that launched the campaign.

“When William Randolph Hearst threatened to move away from California’s taxes, Reno wired him an invitation, as yet unsuccessful,” reported Time magazine.

But while the state gained something by having these personalities purchase homes in the state for technical residences, in fact many of them continued to live in their primary residences elsewhere, and none of them brought industry to the state. What the state got was some more residents who didn’t pay taxes.

Jerome Edwards, who has researched the One Sound State campaign probably more than any other historian, concludes, “It was for a small state of about a hundred thousand people, and it wasn’t dreadfully successful in its own parameters.”

Historian Rocha says that while Nevada enjoyed some prosperity compared to other states, it had little to do with One Sound State. He attributes it to the enactment (before One Sound State was launched) by Congress of the Silver Purchase Act of 1934, which helped open some of the state’s mines. In addition, he said, Nevada got the biggest share of New Deal programs of any state per capita. (In her new history of Reno, Alicia Barber notes that One Sound State also had a public relations function—making the state of quickie divorce and gambling seem more sober and businesslike.)

But more to the point, many people in Nevada were living in misery while political leaders were spending their time trying to attract millionaires to the state.

Gov. Jim Gibbons seems to see One Sound State as a golden age of Nevada history. In his message to the legislature in January, he hearkened back to it.

“The simple fact is that higher taxes kill economic growth and job creation. … Nevada faced worse problems during the mining depression of the 1880-1890s and during the Great Depression,” Gibbons said. “We pulled out of the mining depression in large part based on reclamation projects that allowed agricultural development. We pulled out of the Great Depression with a combination of federal assistance, legalized gaming, and the ‘one sound state’ campaign, which focused on attracting businesses to Nevada by publicizing our business-friendly climate.”

It’s hard to know exactly where to start with this tale, and whether the errors about what didn’t happen are more egregious than Gibbons’ exclusion of evidence about what did happen. Desert farm reclamation was a small blip on the economic radar. What really pulled the state out of the depression that began in the 1870s was more mining booms—in Goldfield and Tonopah, later in eastern Nevada.

And in the 1930s and ’40s, One Sound State brought businesspeople, not businesses, to the state.

What Gibbons also did not tell the lawmakers is that, in the midst of the Great Depression in 1935, Nevada—under conservative banker Kirman as governor—created new taxes on fuel and liquor and licensing fees, and then increased property taxes in 1937—and, historians say, soon started pulling out of the economic doldrums more rapidly than other states. By the time of Pearl Harbor, the Depression was basically over in Nevada. And new taxes helped do it.

The real issue here is not whether Nevada had taxes. It did. But they were taxes that hit the working poor and what middle class there was the hardest. What it did not have was taxes on the rich.

Economist Glen Atkinson, in fact, describes the One Sound State policy as something that held Nevada back after the war when the impact of the baby boom hit the state like a sledgehammer.

“A healthy tax base depends on a healthy and vigorous economy,” Atkinson wrote recently. “In turn, the economic health of a state depends on public programs and a modern infrastructure. So the debate over tax policy should not be cast as government versus business. Instead, we should be building an economy that will support needed public functions. However, if our economic base is evolving away from our tax structure, we need to modernize our tax structure to conform to our modern economy. Nevada has done this before. As [a] rural state built upon mining, agriculture, and railroads, Nevada relied singularly on the property tax. At the end of World War II, Nevada was transforming to an urban state relying increasingly on tourism. In 1955, Nevada passed the first sales tax and modernized … gaming tax administration. These actions were taken to capture the economic activity in the emerging urban-based economy. This urban society needed different public structures and services than the old economy did.”

Historian Edwards says One Sound State isn’t what he’d call a reliable prescription for 21st century Nevada: “No, uh-uh. Oh dear, not at all. We’re a much larger state. We’ve got to go to a much better horizon for a tech policy and so on.”