Some days it’s hard to know whether to fear Big Brother or hit him up for a loan.
The state Unemployment Security Council found itself on the horns of such a dilemma this past week when it voted unanimously to seek federal assistance to help pay the state’s unemployment benefits. Clearly conflicted by the sorry state of Nevada’s economy and the prevailing conservative political winds, it couldn’t win for losing.
Fear the federal government — until the moment you need it. There’s a lot of that going around in Nevada these days.
The council submitted its recommendation to the state Employment Security Division to continue the current unemployment benefit tax rate at an average of 2 percent (with an average salary of $26,400) for Nevada’s 56,000 businesses. A tax increase would have helped fill the state’s ever-deepening debt to the federal government to cover unemployment benefits.
While the tax freeze must sound like welcome news to many struggling Nevada operators, I have to wonder how those conservative business owners who have been shouting the loudest about tightening our fiscal belts are feeling. Between the tea party movement and the growing talk among Republican presidential candidates against taxing and borrowing in a time of crisis, the call for fierce conservatism has reached a deafening roar.
What the state Unemployment Security Council offered, and what was accepted without much more than a peep of protest, was that continuing to borrow from Big Brother at this time was preferable to asking for even a pittance more from the state’s stressed-out business community.
It seemed to make good sense — as long as it stayed under the political radar. Frankly, it doesn’t exactly align with the state’s increasingly boisterous calls from the right to spurn all assistance that doesn’t equate to rolling back government and cutting the fatted hog of bureaucracy and entitlement, great and small. Forget that tax laws favor the wealthy. There’s principle to consider.
And then along comes reality.
By not raising the unemployment tax from its low 2 percent rate, the state will continue to deepen its debt to the federal government, which now stands at $736 million. (The tax rate increased from 1.3 percent last year in an effort to soften the eventual burden. One member of the council said that even at a 2 percent rate, Nevada had the lowest business contribution in the nation.)
Using all kinds of logic, state Employment Security Division administrator Cindy Jones said that although not increasing the tax rate would leave Nevada “slightly” deeper in debt, we can restore the trust fund with a growing economy.
Under the current economic climate that sounds a little like Jack trading the cow for three magic beans. Still, I’ve always admired optimists.
For its continued commitment to borrowing from the federal government, the state will receive an added 26 weeks of unemployment benefits, which will be distributed small check by small check to keep afloat many thousands of citizens who once rode the wave of economic prosperity here.
The lone dissenting voice at the hearing came from Ray Bacon, executive director of the Nevada Manufacturers Association, who asked a simple question: Wouldn’t it just make more economic sense to give a slight boost to the state’s unemployment insurance tax to fill that debt to the government, rather than dig the hole down toward the $1 billion mark?
“As we have done in the past, we think that the best remedy for employers is to bring some level of stability to this thing so that we don’t wind up with a rate increase year after year after year and that we get out of from under the federal thumb as fast as reasonable, not as fast as possible,” Bacon said in a Nevada News Bureau story.
Even a temporary increase to 2.75 percent would raise more than $600 million and go a long way to settling that debt, he said.
But that was too much to think about in these fiscally conservative times, when even the whisper of a tax increase can be made to sound anti-American.
Better to hit up Big Brother for a few more measly million than risk looking bad.
John L. Smith’s column appears Sunday, Tuesday, Wednesday and Friday. Email him at Smith@reviewjournal.com or call 702-383-0295. He also blogs at lvrj.com/blogs/smith.