Thursday, January 23, 2003
But Cort Christie, VP of the Nevada Resident Agents Assocation -- the trade group representing those Nevada residents who serve as officers or merely document collectors for out-of-state corporations with headquarters in Nevada -- says he'll urge companies to set up their HQs elsewhere if Kenny Guinn's gross-receipts tax and increases in business fees passes the Legislature. These companies comprise 80 percent of the corporations registered in Nevada. (Full disclosure: I briefly served as a resident agent as a favor for an out-of-state friend who's a CPA and had clients who wanted a Nevadan to serve as resident agent until they actually established a physical presence in the state.)
Christie says his members would support a doubling in renewal fees, but the other taxes would drive RAs out of state. $100 million ain't peanuts ... particularly when it's easy money for the treasury.
"If that's a basis for someone to call you a Democrat, then on those issues I guess that's what I am."
Nevada's "Republican" Gov. Kenny Guinn, commenting on suggestions that his call for major tax hikes makes him sound like a Democrat.
AT LAST, A PULSE: The Clark County Republican Central Committee issues a challenge to Guinn's Great Society: A resolution calling for GOP lawmakers to cut spending and resist tax hikes ... and for the Legislature to put any proposed tax hikes before the voters in the form of a referendum before they take effect.
The resolution may not stop the lion's share of the tax hikes. Most of the components of the package will come before the Legislature in March and take effect immediately, since they're designed to close the deficit in the current fiscal year and in the next budget cycle and then "sunset" (yeah, right) at the end of the 2005 legislative session. But if GOP activists can peel off a handful of lawmakers, that may be enough to slow the tax train.
BOMB-THROWER ALERT: Good to see GOP gadfly Grover Norquist, president of Americans for Tax Reform, causing mischief again. On Wednesday, Grover said Guinn's tax proposals threaten Nevada's business-friendly environment, ranked first in the nation in 2001 by the Small Business Survival Committee. Saith Grover:
"When Governor Guinn calls legislators cowardly for opposing a tax hike, he should rethink his own lack of courage at taking a bite out of Nevada's budget."
This has the fingerprints of another rabble-rouser, former Nevadan Chuck Muth, all over it. For years, Muth, now executive director of the American Conservative Union, headed the libertarian-leaning Nevada Republican Liberty Caucus, and was a thorn in the side of the state's GOP establishment. Something tells me Chuck asked Grover for a little favor.
MY COLLEAGUE, UNCLE MARTIN: The latest throat-clearing by Las Vegas Sun Editor Brian Greenspun, urging the Legislature to raise taxes at least as much as Guinn has suggested, contains this gem:
"Some alien in the media suggested that we don't need a Department of Motor Vehicles because it was just a ruse for the police to keep track of us."
That "alien" is my friend and colleague Vin Suprynowicz, whose column last Sunday challenged the notion that state government had been cut to the bone. Vin actually foreshadowed the response his recommendations would get from the clueless Greenspun crowd:
"The centurions of the kleptocracy will doubtless ridicule every one of these proposals as 'fantastic, extreme and ridiculous.' Which tells us how hard they're really looking for ways to reduce the size, cost and intrusiveness of government in our lives, doesn't it?"
As is typical, Greenspun isn't bright enought to get Vin's point. And, again as usual, he didn't disclose his obvious conflict: Nowhere in the column would the neophyte reader know Greenspun served on Guinn's Task Force on Tax Policy — which, BTW, made sure that Brian and his fellow duffers ducked some of the new levies: The task force's proposed "entertainment" tax proposal excludes rounds of golf and country club memberships.
As for calling someone an alien, remember the story of the pot and the kettle. Didn't Greenspun purchase an estate in Del Mar, California, a year or so back? And doesn't he live there much of time?
Wednesday, January 22, 2003
Tuesday, January 21, 2003
What's going on here? First, it's clear that managers count and, as Barry (Glassman) puts it, these particular managers "have a vested interest in applying prudence and principles" because their names are on the door. Not just the family reputation, but the family money, is at stake. The Davis family, for example, is the largest shareholder in each of its nine funds, with a total of $2.5 billion invested.
Also, since they know they aren't likely to be fired for poor short-term performance, the namesake managers can take the long view, rather than frantically trading the way most managers do. Namesakes hold the average stock for about 21/2 years - for a turnover ratio of just 41 percent, one-third lower than the average fund among the 500 largest. Seven of the namesakes have turnover ratios below 20 percent.
As Jim points out, there's still no substitute for performing due diligence before investing, but the notion behind why these funds would tend to perform well makes sense.
BTW, people confuse me with that baseball player all the time (and I also bat right, throw left) ... but once anybody sees or hears me, then the party's over.
While the new taxes attracted the most attention initially, here's what Guinn offered state residents as a show of good faith that the government would make "sacrifices" as well: nothing. Well, he did promise to eliminate 500 state positions that had been "frozen" and thus unfilled since 1999. But even these job "cuts" are bogus, because his budget adds 184 new DMV employees and 430 other positions. In addition to the tax hikes, Guinn proposed more than $1.3 billion in new spending over the biennium, a 37 percent increase. Roughly $1 billion of the new spending would expand current programs: $530 million to boost per-pupil spending and to give bonuses to certain new teacher hires; a 2 percent overall pay hike for teachers; $24.2 million to start a full-day kindergarten program; $175 million more to the university system; $242 million in various "job-creating" public works programs, over and above a series of bond measures that were passed by voters in November.
This may be the first time since the Great Depression an elected chief executive has proposed a massive tax increase and major spending hikes during an economic slump. While watching the speech on TV, my left-wing columnist buddy Steve Sebelius shouted, "He wants to raise taxes even higher than I do!"
Among the speech's many low points was this gem, targeted at the handful of Republican lawmakers (not to mention the thousands of Nevada residents) who might prefer fiscal restraint over a new round of government looting:
"To me, this [cutting spending] is not a choice worthy of our citizens. It is not a choice for leaders, but a choice of political cowardice."
Republican Asssemblyman Bob Beers, the Las Vegas lawmaker who put together some $479 million in spending cuts from current programs, had this response:
‘‘Political cowardice comes in many shapes and tones. Another person may suggest that -- taking a look at the landscape, with a flat economy -- raising citizens’ taxes 30 to 35 percent is political cowardice.’’
Another outright lie by Guinn dealt with "shrinking" new revenues:
"In 1997, the Legislature had $543 millino in new revenue to fund expenses for new school enrollments, mandated, healthcare and state services. By 1999, new reveneus dropped to $378 million, and in 2001 they were down to $150 million. This trend has worsened. This biennium, we have just $24 million to pay for the needs of this growing state."
Bullshit. These "new revenues" were in fact surpluses that were left over after the Legislature had enacted its two-year budgets. In other words, the state was raking in cash faster than the sticky-fingered politicians could spend it! In fact, Nevada is one of only three Western states where tax revenues increased in the past fiscal year. But the appetite of the politicians and the bureaucracies is insatiable.
The Nevada Policy Research Institute, the state's free-market think tank, has put together a terrific analysis of the budget mess, its origins, and suggested ways out. The link to the package of stories is here.
Why is Kenny Guinn launching an expansion of government unheard of since the Great Society? Sadly, Guinn appears to be that most dangerous of characters: an elected official in search of a legacy. It wouldn't be good enough for Guinn -- a lifelong government management type whose primary experience in the "private sector" was as an executive for the gas company -- to complete two terms as governor, shepherding the state through a period of unprecedented growth and then a serious recession without raising taxes.
Oh, no. True to his nature as a bureaucrat -- he was Clark County school superintendent and president of UNLV -- Guinn believes his legacy will be defined by the number of new programs he gets past lawmakers, or how high he can push public employees' salaries. Perhaps in his heart of hearts, he honestly believes there's a positive correlation between the state's prosperity and the size of the public sector.
The gaming industry, which handpicked Guinn for the job in 1998, confident he would protect its interests, will not protest, so long as the casinos don't have to pick up much of the tab. Currently, the casinos provide about half the state's general fund revenue. That's by design. When gambling was legalized statewide in 1931, the casinos agreed to become a cash cow for state government: Grant us status as a regulated, privileged industry, and we'll be Carson City's ATM. If you need money, come to us, and we'll provide it.
In recent years, as the gambling industry has spread to other states, and casinos have cleaned themselves up and become respectable businesses, Nevada's gambling halls have attempted to renege on their earlier agreement and make other businesses pay their "fair share" of taxes. Meaning: Don't tax us, get the other guys.
That's why this debate will be contentious. To the extent Nevada's economy has diversified beyond tourist-oriented businesses and retail, the source of that growth has come from companies that located here precisely to escape oppressive taxes elsewhere. A few examples:
Microsoft located a division which licenses software to Reno a few years back. The move saved Redmond $9 million in Washington state taxes.
Citibank's credit card processing center is situated in a Las Vegas suburb.
Amazon.com's Southwest distribution center is located outside Reno.
Should Nevada "broaden its tax base" with higher taxes on nongaming businesses, these companies could easily leave the state, taking their relatively high-paid work force with them.
Guinn's office reports that the state's general fund currently receives 71.2 percent of its funding from sales and gaming taxes. If Guinn's tax package is approved, that percentage would drop to roughly 57 percent. That's a dramatic shift in the state's tax base. Even the gaming industry's trade group, the Nevada Resort Association, says it would pay only about $40 million of the $1.1 billion in new taxes. That's hardly fair.
Odds are, Guinn will get most of this package, even though he needs a two-thirds majority in both houses of the Legislature to raise taxes. Republicans may be able to get some programs cut. Democrats may try to trim some of the more regressive taxes.
No matter what happens, though, Guinn has one dubious accomplishment to his credit: He's made it much more likely he'll be succeeded by a Democrat in 2006. It'll be no problem for any Democrat, from the far left or the center, to run to the right of Guinn -- he backed the largest tax increase in state history! -- and, by proxy, the GOP nominee. The sin taxes in the package are exceedingly regressive; and aside from the gross receipts tax, which has a $450,000 annual exemption, the business taxes pummel mom-and-pop entrepreneurs. Republican hopefuls will have to distance themselves from Guinn early and often. Thanks, Kenny.
Monday, January 20, 2003
Another startling bit of info was revealed in this graphic which spells out how much more money public employees in several classifications make than the statewide average. The conventional wisdom states that on average, public employee salaries are pushed upward because the overall compensation package provided to entry-level workers -- secretaries, custodians, etc. -- is much higher than that the same employees in the private sector receive. But once you reach the top of the food chain, the private sector offers much better pay and benefits; that's why it's so difficult to find top-flight managers to run government departments. (Hence the constant wailing about "brain drains" or "talent deficits" from Guinn, county and city managers, and various state department heads.)
On Nevada, however, that's not true. Consider this comparison of CEO salaries:
Statewide (public and private) $115,370The lesson is clear: Want to get rich in Nevada? Get a government job.
State government $117,000
Clark County $175,000
City of Las Vegas $148,663