Assembly Taxation, Feb. 8

Good Governance

| February 8, 2011

I'm sitting in the Assembly Taxation Committee hearing at the Nevada Legislature and have noted an important legal question just raised by Assemblyman Ed Goedhart.

Legislative Counsel Bureau staff is presenting this session's Revenue Reference Manual to committee members and reviewing changes in the General Fund revenue structure resulting from the sunsetting of taxes imposed during the 2009 session pursuant to SB 429.

As the discussion focused on projected revenues resulting from the Modified Business Tax (a tax assessed against employers as a percentage of payroll), Assemblyman Goedhart questioned staff as to whether the tax rate applied to public-sector employers or only targeted private-sector employers. Staff responded that the tax is designed to apply only to private-sector employers.

This raises an important legal question with respect to the "Equal Protection Clause" of the Fourteenth Amendment to the US Constitution. The law appears to discriminate specifically against workers in the private sector who suffer wage loss as a result of payroll taxes assessed against their employer. Public employees in Nevada are exempt from this wage loss because of the tax's limited applicability.

There is definitely a case to be made that Nevada's MBT denies those who work in the private sector equal protection under the law.

Notably, NPRI has recommended eliminating the MBT for other reasons. The MBT is the most volatile General Fund revenue source used in Nevada and is a direct financial penalty against private-sector empoyers for hiring new workers or offering pay raises.

I'll continue to update this blog live from Carson City as the session wears on over the next few weeks.

Geoffrey Lawrence

Geoffrey Lawrence is director of research at Nevada Policy. Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission. Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association. From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society. Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics. He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation. Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke. He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.