Choppy seas

Wednesday marked the official start of what state lawmakers hope will be a two-year pleasure cruise. The higher tax rates approved by the 2009 Legislature took effect with the promise of delivering Nevada's schools and social services from chaotic revenue shortfalls and special-session budget cuts.

You, on the other hand, are expected to tough out the choppy seas with little more than a floatie. Everything costs a little more now. The sales tax is 0.35 percentage points higher, pushing Clark County's rate to 8.1 percent. Your vehicle registration fees won't fall as fast. Tourists will pay more for their hotel rooms. And your employer will cough up twice as much in payroll taxes to keep you around.

Unemployment is still rising, home values are still falling and all kinds of businesses remain in peril. But we're supposed to feel reassured that Nevada's "essential services" are not. The nonpartisan Economic Forum told lawmakers the revised tax rates could be counted on to produce precisely $6.9 billion for the state over the next two years.

But if this economy has taught us anything, it's that we can't count on anything. Instead of viewing the forum's revenue projections with skepticism, taking a conservative approach to budgeting and cutting back on expenses, lawmakers spent every dime -- and increased the budget 10 percent in the process.

They simply couldn't bring themselves to cut so many of the new programs they had splurged on over previous years. So legislators passed the tax increases with full knowledge that the hikes, in all likelihood, won't deliver enough revenue to keep the budget balanced and will require them to convene in the near future to make the tough decisions they put off this spring.

Last week, the Department of Taxation reported that taxable sales in April fell 17.9 percent when compared with April 2008. It was the sixth straight month of double-digit declines in taxable sales, and it continued a two-year slump of falling sales.

When economic activity slows, so does the flow of revenue to governments. Sales, use, excise, liquor and cigarette taxes are all failing to hit state projections.

Meanwhile, consumer confidence took an unexpected tumble in June, giving economists and investors no hint of when a recovery might begin to take hold.

None of these factors can accurately measure the pain tax increases will inflict on the Nevada economy. And make no mistake, siphoning millions and millions of additional dollars from tourists, consumers and businesses every week will hurt every sector of industry.

Toss in the job-killing effect of a minimum wage increase that also took effect Wednesday, and you've got more than enough pressure to bring Nevada to the breaking point.

Last month's conclusion to the 2009 session was full of sentimentality as lawmakers said goodbyes to about two dozen term-limited colleagues. The unspoken part of the formalities was the unshakable truth that they'd be seeing one another -- and soon. Gov. Jim Gibbons is prepared to call them into special session this fall, once the first few months of data from the new fiscal year show the state still doesn't have its spending problem under control.

Think we're being overly pessimistic? Our bellwether to the west, the crumbling state of California, already has determined that May tax revenues came in $827 million below projections -- and that conservative estimate was made at the start of the month.

There are more rough waters ahead and, unfortunately, Nevada is in a poor position to navigate them. When government increases taxes and spending during the worst recession in generations, you don't stop taking on water -- you have to bail faster.