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by Paul Kiser
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Paul Kiser

Among our Country’s 50 States, Nevada has been imploding for several years and is on the brink of complete collapse. Nevada ranks:

  • 1st in Unemployment at 14.4% (over a point higher than the next highest State)
  • 1st in Foreclosures (1 in 84 homes)
  • 1st in Crime (2009 – CQ Press)
  • 44th in 8th Grade Math Scores (2009)
  • 48th in 8th Grade Reading Scores (2009)
  • 49th Smartest State (2004, 2005, and 2007 – based on 21 factors)
  • 45th Healthiest State (2009 – United Health Foundation)

Nevada has managed to take advantage of traditional and non-traditional industries to keep its economy viable, but it has typically been dependent on easily exploited, non-competitive markets (gaming, quickie marriage, quickie divorce, and …quickies.) Unfortunately, in the past decade the strategy of taking advantage of human vices and lusts has failed as other States have decided they’re not as moral as they thought. As one might expect, Nevada’s government has been as precariously designed on a Natural Law type framework where accommodation of business needs supersede governing for and by the people.

Clouds on the Nevada horizon

As the statistics show, all that has now caught up with the Silver State and the result is a failing, under-funded, dysfunctional society that is so deep in a hole that they can’t see the way out. But to understand Nevada, a person needs to understand the history of a State that had a premature birth and since then it has behaved like the bastard child of our Country.

Nevada’s Sordid History
Nevada was founded in 1864, not because it met the minimum requirements for Statehood, but because of a marriage of convenience when; 1) President Abe Lincoln needed more political support and, 2) the residents were trying to rid themselves of Mormon control.

The re-election of Abe Lincoln eight days after Nevada became a State was not a coincidence as the political powers in Nevada openly favored President Lincoln. By giving Nevada Statehood, President Lincoln was assured that his Administration would maintain control as the Civil War reached a crucial stage in the last year of the conflict.

Nevada's State Flag

At the same time, many of the residents of the region were motivated by a distaste for the governance by the Utah Territory authorities as it was being handled by the Church of Latter-Day Saints where all positions were filled by faithful Mormons. Fortunately for the soon-to-be Nevadans, the Church was not in good graces with the U.S. Government and the Mormon Rebellion in 1857-8 (a saber rattling affair) led to the Mormons retreating back into the Salt Lake area, leaving the door open for residents to split off the western two-thirds of existing State as the Nevada Territory. They then pursued Statehood ensure a local government free of Mormon domination.

Although initially rejected, Nevada’s application for Statehood became seductive to the Republicans who sought to outmaneuver political opponents in Washington, D.C. Thus, Nevada’s motto, “Battle Born” is probably more reflective of the political games of the time, rather than the State’s birth during the Civil War.

Open For Business
Though it is the nation’s 7th largest State by area, it is in the bottom third of the Country as measured by population. Eighty-five percent of Nevada’s 2.5 million people live in either Las Vegas or Reno and only 14% of the residents were born in the State.

Because Nevada’s population has always been small and transient, it has been easy for the State government to be controlled by business interests. In the early years mining, ranching, and railroad interests heavily influenced the government and while Railroad owner’s power has faded, the gaming industry has stepped in to take their place.

One example of how the State has been run by and for business men is John Sparks, for which Reno’s sister city is named. John Sparks was a shrewd, unethical man who purchased small parcels of land in Eastern Nevada around water sources and then denied access to other ranchers. In this way he could use public land for grazing his cattle but prevent other ranchers from having access to water for their cattle. He and a partner eventually became mega-land owners through shady manipulation of Homesteading laws.

Although he lost most of his wealth when his company’s cattle died in a severe winter near the end of the 19th Century, he was elected Governor in 1902. In political office he became the darling of the Railroad owners who gave him free train travel from his home south of Reno to his office in Carson City. Governor Sparks political legacy is measured by the favorable railroad legislation produced during his administration. In 1905, the City of Sparks was founded soon after his death and to this day associates itself with its ‘railroad heritage’.

The Road Not Taken

The mining industry has the longest association of political clout with the State and even today enjoys an unusually favorable tax status in Nevada as they pay taxes on net profit. Because the taxes are calculated on net instead of gross profit, the mining corporations can avoid paying taxes in years of high revenue by spending more money on equipment and services. Much of the money spent goes to companies outside the State, leaving the Silver State holding the bag, not the money. Mining companies have major lobbying forces in Nevada that not only promotes their interests with State legislators, but also have been rumored to aggressively go after citizens and groups who oppose their favored tax status.

How favorable is Nevada’s mining tax status? This year mining is projected to contribute on 1.4% of the State’s revenue. That is roughly equal to the total tax paid for renting a car in Nevada OR the tax paid on liquor purchases. It is half the tax collected on cigarette and tobacco sales. Mining is a $1.5 Billion dollar industry in Nevada and contributes one of the smallest portions to the States revenue, but is voraciously defended by senior legislators of both parties at both the State and Federal levels.

In the last half of the 20th Century, gaming interests have assumed a share of influence as almost 25% of the State’s budget is financed by gaming taxes. Because of the massive lobbying efforts of mining, gaming, and Chamber of Commerce groups, the State government is run predominantly by and for conservative business interests. Nevada is ranked as one of the top business-friendly States and is a safe haven for wealthy individuals and corporations who seek to take advantage of Nevada’s lack of corporate, inventory, income and capital gains taxes.

The Failed Argument
Conservatives across the nation have suggested that taxes are killing the free market and all economic ills would disappear if not for the evil of a government-created fair playing field. That argument is proven wrong in Nevada. Despite the State’s business-friendly environment, it has the highest jobless rate in America and businesses are not thriving, but dying. There is no spin anyone can put on Nevada’s grand experiment. Government is not the source of our economic ills.

In a recent political debate in California, the Republican candidate for Governor argued that businesses were leaving California because of more favorable business environments in neighboring western States. She even went so far as to name them. Ironically, the one State she couldn’t add to her list, Nevada, has a more favorable businesses environment than any of the State’s named. If her argument were true, why aren’t businesses flocking to Nevada?

The Disaster Brewing for Decades
Politicians have known for decades that the economy of the Nevada was unsustainable and that economic disaster is a matter of ‘when’, not ‘if’. Dependence on only a few industries for the State’s economy has always kept Nevada vulnerable to significant changes in economic and/or business conditions. For years, Nevada’s main source of tourism and gaming revenue have been consistently in decline because of California Indian gaming.

2010 Projected Nevada Tax Revenue

Over reliance on the gaming tax revenue coupled with the lack of traditional tax revenue sources like income taxes have pushed the State to make up for it by having among the highest sales and gasoline taxes in the nation. The lack of corporate and capital gains taxes on wealthier tax payers has pushed the burden on those who are least able to pay.

Epic Failed State
Last year, like many States, Nevada felt the crushing blow of the 2007-09 Recession. Massive cuts (Higher Education was presented with a 36% cut in the Governor’s budget) and a few minor tax increases made it possible for the 2009 Legislature to finalize a budget. But in 2011, the well is dry. No one can predict how the politicians will come up with a budget, but with the Tea Party’s domination of Nevada politics and a hysteria over cutting taxes that don’t even exist it is obvious that any solution will involve gutting programs and shredding the State’s infrastructure. As Nevada is already No. 1 in crime, unemployment, and foreclosures, the continued devolution of the State’s government will mean we can only watch the situation go from worst to Epic Fail.

Poor Role Models: Governor's Dinner in Washington, D.C. - image thanks to 8NewsNow.com

Political Wackos Rule
A rational person would probably look at the current situation in Nevada and determine that this would be the time to find people of high moral character and great thinkers to take control of the crisis. This would also the time to capitalize on those people who are in positions to use their influence and power to act on behalf of the State at all levels of government. Unfortunately, a lynch-mob mentality has besieged the electorate and a blood-hunt by the national Republican Party has poured millions of dollars in an effort that will eviscerate Nevada’s voice in American politics.

There is little reason to believe that anything can prevent Nevada from an economic meltdown along with a catastrophic failure of government infrastructure. The cities and counties will experience the full brunt of the disaster as the Nevada constitution prohibits Home Rule, which means that they cannot take independent action to preserve themselves by isolating and controlling their revenue sources.

There is one positive aspect of this situation. As the nation works to recover from the Recession of 2007-09, every other State in the nation will be able to say, “Well, at least we’re not Nevada.”

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