Editorial: A promising sign

Thursday, Aug. 26, 2004 | 8:50 a.m.

In the fiscal year that ended June 30, the state of Nevada took in $141 million more in tax revenue than government officials had projected. Opportunistic politicians and their friends in right-wing media circles likely will pounce on the figure and try to flog the governor and the Legislature for the surplus. They will argue that state government built a budget-and-tax plan, using new and increased taxes, that was too big while intentionally understating how fast the economy would grow.

There are a number of reasons why such an assessment would be dead wrong. For starters, the economy in Nevada has continued to be much stronger than was expected. And our two long-standing, major sources of taxes -- gaming and sales -- are tied directly to the health of our state's economy. It stands to reason then that we're collecting more taxes than could have been anticipated ($41.1 million more from gaming and $60 more million from sales). In addition, Nevada's red-hot housing market has brought in $36.6 million more from the real estate transfer tax than had been anticipated. Add up those three sources of revenue and nearly all of the extra $141 million is accounted for.

Let's not forget, either, that $50 million of the extra $141 million will automatically be shifted to the state's rainy day fund. The Legislature, when it passed its two-year budget last summer, depleted the $130 million that had been in this "bank account" for emergencies. And for those who believe that we didn't need more taxes at all, imagine the Draconian cuts in education and social services we'd be facing now if the $833 million tax increase hadn't passed. The state's finances look promising right now, but our tourist-based economy has proven to be volatile in the past, a reason why officials should temper this good news with caution as they look ahead to the next session of the Legislature.