Document Type

Capstone Project

Publication Date

5-2014

Publisher

Brookings Mountain West

First page number:

1

Last page number:

13

Abstract

Recurring and fluctuating levels of economic activity known as the business cycle have a profound impact on state legislators trying to balance their finances. They result in higher unemployment, declines in revenues and a corresponding increase in the need for social welfare and public services. This makes state budgeting particularly complex during times of contraction when the state needs to do more with less. Nevada, with its limited tax base, biennial budget making, and overreliance on an industry that is highly volatile in response to economic fluctuations, experiences particularly dramatic upswings and shortfalls. Contractionary fiscal policies such as tax increases and spending cuts can slow economic recovery but are unavoidable in order to balance the budget during times of recession.

This policy brief will contend that Nevada needs to reform its revenue structure in order to better stabilize budgetary volatility in response to the business cycle and more effectively reflect the 21st-century economy. While tax reform is an issue that is revisited regularly by Nevada lawmakers with each legislative session and promises on the campaign trail, little actual progress is made because of Constitutional obstacles, special interests, lack of political will because the risk of reprimand at the ballot or poorly implemented political strategy. This brief will identify the historical and recurring barriers to tax reform in Nevada as well as list four recommendations for creating a broader, fairer and more stable tax structure including closing loopholes, diversifying and broadening the base, reflecting contemporary consumption habits, and tapping into Nevada’s unique opportunity to create a recession-proof revenue stream. Finally, it will provide a possible roadmap for how these policy changes can more effectively become a reality. The ideas discussed here are by no means comprehensive as there are a myriad of further reform possibilities, particular in regard to the relation of county and municipal taxes.

Keywords

Business cycles; Nevada; Taxation, State

Disciplines

Economic Policy | Public Administration

Language

English

Comments

This is a student research paper, patterned on a Brookings Policy Brief, written under the supervision of a Brookings Scholar.


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