Nevada Should Look to Laxalt, Reagan Legacies

Capitol dome

BY JIM HARTMAN

In his February State of the State speech, Governor Brian Sandoval unveiled an ambitious and historic $7.3 general fund biennial budget. Nevada’s chief executive called for significant new funding for Nevada’s education system, asking the Legislature to pass a tax package that would include $560 million in new revenue as well as making permanent the $580 million in “sunset taxes” first enacted as a temporary tax plan in 2009.

The $1.14 billion in proposed taxes over the next two years requires approval from a two-thirds majority in both legislative chambers. While passage in neither house is assured, opposition to the tax increase is most heated among some conservative Republicans in the State Assembly. Fifteen “no” votes in Nevada’s lower house would defeat the plan; nine Assembly Republicans signed the Taxpayer Protection Pledge before the November election, promising to oppose all tax increases. “The Pledge” is promoted at the national level by Americans for Tax Reform (ATR) and is administered in Nevada by Citizen Outreach. ATR’s stated goal is “to oppose all tax increases as a matter of principle”. The organization, founded in 1985 during the Reagan administration, also sponsors the Ronald Reagan Legacy Project, which endeavors to name public landmarks after President Reagan.

The Pledge is both an affirmative statement of principle and a barely-veiled threat often used aggressively against Republicans who decline to sign. Citizen Outreach has in the past used it as a political weapon in primary election challenges against Republican legislators who resist putting ink to the document, as well as against those who have broken The Pledge. But now, in what seems to be a historical first, a recall effort has been launched against a Pledge-signing lawmaker who has not yet broken the Pledge. In December, a recall campaign against Assembly Speaker John Hambrick followed statements in which Hambrick said he was open to the “possibility” of new taxes related to education funding. Recall notices have been filed against two other GOP Assembly members, as well. Eight additional GOP members have so far been threatened with possible recall campaigns.

While the Nevada legislature ultimately will vote on adoption of a state budget, the Constitutional duty to propose a tax and spending plan for the state is left to Governor Sandoval, a former member of the State Assembly. During his swearing-in speech, Sandoval noted that one of his political mentors was former governor and U.S. Senator Paul Laxalt. This fealty may reveal at least some of Sandoval’s inspiration for his budget and tax plan. Laxalt faced a similar situation back in 1967 when he first assumed the governorship after defeating two-term Democrat Governor Grant Sawyer in November 1966. Writing later about his time as governor in Nevada’s Paul Laxalt: A Memoir, Laxalt noted that economic recession had greatly reduced state revenues and that even with cuts the budget could not be balanced. “We came to the painful conclusion that we needed more revenue,” Laxalt wrote. “How could a conservative new governor justify a new tax increase in his first year in office? There was no way out.”

Seeking advice, Laxalt called his friend Ronald Reagan, who had just been elected governor of California. Reagan was in a similar predicament. “My political pain was eased somewhat when I called Ronald Reagan, who was newly inaugurated as governor of California,” Laxalt wrote. “He said ‘I have the same problem and I am going to ask for a tax increase. It is the responsible thing to do’”. And so it was that Laxalt in Nevada and Reagan in California both raised taxes in their first state budgets in 1967, on the basis that it was the responsible course of action.

In Laxalt’s case, he proposed distributing the pain evenly. “In order to make the tax hike ‘fair’, I tried to spread the burden as broadly as possible,” he wrote. A bi-partisan two-thirds majority of Nevada’s legislature supported Laxalt, raising the gross gaming tax by 20 percent and the sales tax by 50 percent (from 2 to 3 cents). With these additional revenues, Laxalt was able to keep many of his campaign promises. The Laxalt legacy includes the beginning of the Nevada community college system; the building of the state’s first medical school at UNR; the modernization of gaming with “corporate licensing”; a bi-state compact with California to protect Lake Tahoe from over-development and the establishment of the Tahoe Regional Planning Agency; the addition of 12,000 acres of state park land at Lake Tahoe; reforms at the antiquated Carson City prison; and his “Lighthouse of Education” pledge to raise teacher salaries and lower classroom sizes.

As for Reagan, after winning a landslide election victory in 1966 over two-term Democratic Governor Pat Brown in California, he inherited an immense budget deficit. The inherited deficit was estimated at $400 million (more than $2.8 billion in 2015 dollars) and growing daily at a rapid rate. He was also required by the state constitution to bring the state books into balance. Initially, he attempted a 10 percent across-the-board spending reduction, but no amount of budget reductions could have balanced California’s budget in 1967. Reagan then proposed the largest tax hike by any governor in the history of the United States up to that time. His plan provided for tax increases on sales, personal income, banks and corporations, insurance companies, liquor, and cigarettes. It had a price tag of $1 billion (more than $7 billion in 2015 dollars). The budget and tax bill was approved on a bi-partisan two-thirds vote in both legislative chambers. Ultra-conservative critics considered Reagan a turncoat.

Notably, the Reagan tax increases generated substantially more than was needed to close the inherited deficit, provided funding for major initiatives during his two terms as governor from 1967-75. The “Reagan record” later included delivering on his promise of property tax relief; additional school district funding to satisfy a court decision thrust on the state; and 145,000 acres added to state parks prior to Golden State land prices soaring. It was the largest land acquisition by any modern California governor.

Now, 48 years after Laxalt and Reagan took bold steps to right their respective state ships, Governor Sandoval has seen and stated the need for revenue and has articulated a bold vision for a “new Nevada”. He has taken a stand for specific education initiatives and has proposed a detailed tax plan. It is the duty of Nevada’s Legislature to consider those initiatives and evaluate Sandoval’s plan as well as to consider other possible tax vehicles – or to offer viable alternatives. Lawmakers would do well to remember that two conservative Republican icons, Nevada’s Paul Laxalt and California’s Ronald Reagan, showed that real leaders do the “responsible thing”—which, in today’s Nevada, may well mean increasing taxes.

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