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TWO f THE NEVADA TAX REVIEW P .O .B ox 529 Tel. 2-1678 Reno, Nevada NUMBER SEVENTY-ONE APRIL, 1916 Published Quarterly by NEVADA TAXPAYERS ASSOCIATION A. J. CATON, President GORDON B. HARRIS, Vice-President F. A. TRACY, Secretary-Treasurer DRYDEN KUSER, Director and Editor EXECUTIVE COMMITTEE W. R. BRACKEN, Las Vegas . J. E. HORGAN, Reno R. W. BRUCE, Reno J. 0. KINNEAR, McGill A. J. CATON, Reno RAYMOND E. MARKS, Reno GORDON B. HARRIS, Reno F. A. TRACY, Reno W. B. WRIGHT. Deeth ----- ? Attention, Taxpayers! It is a w e ll recognized fact that m uch legislation is the result o f the activity o f pressure groups. P ro b a b ly at no time has this been m ore true in W a sh in g to n than n ow . T h e trem endous increase in tax rates to finance the w a r is a tem ptation fo r spending in time o f peace and even w ith the recent reduction in rates the income is vastly greater than at any previous time in Am erican history. T h e on ly possible justification fo r a retention o f these taxes at anyw here near the present level is the balan cin g o f the bu dget a n d / o r amortization o f the national debt, bu t the tendency is to use it fo r other purposes. Congress is the victim o f trem endous pressure b y theorists an d jo b seekers w h o w o u ld change ou r republic to a bureaucracy, and it is also the target fo r self-interested grou ps w hose object is personal gain. It has been accepted in recent years that taxpayers are not im m une fro m the principle that " I n u n ion there is strength,” and that unless- organized effort is m ade by the taxpayers as such, there is little hope o f prop er economy an d efficiency in governm ent. It w as w ith this thought in m in d that in 1914 a g ro u p o f citizens o f A riz o n a fo rm ed a state taxpayers association, a non-governm ental organiza­tion supported by voluntary contributions, and w hose sole object w as the reduction o f the cost o f governm ent com­mensurate w ith efficiency. N e w M e x ic o fo llo w e d the next year, M o n tan a in 1921 an d N e v a d a w as the fou rth state to fo rm such an organization in 1922. Since then 32 other states have been added to the ro ll. T h e o rigin al purpose o f these state associations w as to w o rk on the state and local level, bu t that w as in the days w h en federal taxes w ere an infinitesimal prop ortion o f w h at they are n ow , an d w h en m ost o f the taxpayers’ dollars w en t into the state, county, o r m unicipality in w h ich they lived. In recent years this picture has been reversed, an d fo r the in dividu al N e v a d a taxpayer, the decisions reached in W a sh in g to n have become even m ore im portant than those in Carson City. T o w o rk effectively on the federal level, the various THE NEVADA TAX REVIEW state taxpayers associations have fo rm ed a loosely knit o r­ganization w h ereby independence o f action is still reserved to each state association, bu t through an exchange o f in fo r­m ation an d th rou gh the ability to rally nation-w ide sup­port, they are able to w o rk m ore effectively concerning p e n d in g federal legislation. A lso , tw o national tax organ i­zations, T h e T a x Foundation, N e w Y o r k , and the Citizens N a tio n a l Committee, W a sh in g to n , D . C., are unofficially allied w ith the state associations. N o w , w h at w e are d riv in g at is that there has never been a time w h en the w o rk o f a state taxpayers association is m ore im portant. T h e activities have broadened and in ­creased fa r beyond the thoughts o f the origin al founders. N e v a d a has the most under-staffed association o f any o f the states. It has become imperative, i f our association is to adequately fu lfill its function, that an assistant director be em ployed, w h o w ill devote his time prim arily to statis­tical and field w ork . A lso , the overhead cost o f operating the Association has risen due to increased stenographic w o rk and h igher rental. Finally, d u rin g the next fiscal year w e w ill face another session o f the legislature, and it w as proven at the last session that one in dividu al cannot ade­quately meet its problem s. T h e service rendered through the legislative bulletin in itself w as nearly a fu ll time jo b d u rin g the sessions o f the legislature. It d id not leave sufficient hours fo r prop er conferences w ith legislators, or fo r intensive study o f the several hundred bills which w ere introduced. T h is editorial is fran k ly an appeal to Y O U . Y o u w o u ld not be on the m ailin g list o f this T a x R eview if w e d id not believe that you w ere interested in ou r problem s, and w e u rge that i f you are not already a m em ber o f the N e v a d a Taxpayers Association, you w ill join ou r asso­ciation at this time and p rio r to ou r annual m eeting on M a y 14, in order that w e m ay bu d get accordingly fo r the com ing year. It may be that even though you are a m em ber, you w ill feel that you are in a position to increase your contribution or, i f not, that you w ill obtain a n ew m em ber fo r us. W e need your help in increasing our income b y an estimated figu re o f $5000.00. It is needed i f w e are to represent you as effectively as w e should and, to repeat, there never w as a time w h en there w as m ore need fo r you to be so represented. I f you pay substantial property taxes, w e w o u ld su g­gest that you p ay u pon the basis (p ro v id e d fo r u nder our b y -la w s ) o f one-quarter o f one p er cent o f the amount p aid by you in property taxes in N e v a d a . H o w e v e r, fo r those w h o d o not pay la rg e property taxes, w e suggest one o f the fo llo w in g classes o f m em bership: Patron, $500; Benefactor, $250; S upportin g M em ber, $100; C ontributing M em ber, $50; Sustaining M em ber, $25; A ctive M em ber, $10; Associate M em ber, $5. RADIO TAX TALKS T h ro u g h the courtesy o f K O H , the D irector o f the N e v a d a T axpayers Association is g iv in g a series o f radio talks on taxation. T h e y consist o f ten 15-minute broadcasts on M o n d a y nights, fro m 8:15 to 8:30 o ’clock. T h e first o f this series w as on A p r il 8. T h is radio p ro gram is one o f the Association’s activi­ties designed to keep the taxpayers tax-conscious and tax-inform ed. THE NEVADA TAX REVIEW THREE A S S O C I A T I O N T O C O N D U C T F O R U M A N D H O L D IT S A N N U A L M E E T I N G I n ; accordance w ith the provisions o f the by-laws, the annual m eeting o f the N e v a d a T axpayers A sso ­ciation w ill be held af 3:30 P . M ., on Tuesday, M a y 14, at the C ham ber o f Com m erce room in the State B u ild in g, R eno, N ev ad a. T h is w ill consist o f the business session fo r the election o f mem bers o f the Executive Committee fo r the ensuing year, and fo r such other business as may come before the m eeting. Im m ediately fo llo w in g w ill be the m eeting o f the new ly elected Executive C o m ­mittee fo r the election o f officers. In conjunction w ith the annual meeting, the A sso ­ciation this year is initiating a n ew activity. O n e week later, on Tuesday, M a y 21, from one until five o ’clock, the Association w ill conduct an open foru m on se­lected tax subjects. T h e m eeting is open to the public, and it is u rged that all taxpayers attend. Personal invitations are bein g extended to elected, and certain appointed state officials, an d to leaders in various fields particularly interested in the subject matter o f the forum . T h e date o f M a y 21 has been chosen to make pos­sible the attendance at the m eeting o f H erbert J. M ille r, F ield Representative o f the Citizens N a tio n a l Committee, w h o w ill act as general m oderator o f the forum . It is also expected that D r . M . H . H arris, D irector o f the U ta h T axpayers Association, and C hairm an o f the C oordin atin g Committee o f the State T axpayers Associations, w ill be present and take part in the forum . F o r the in dividu al subjects, qualified speakers w ill g iv e a b rie f open in g summary o f their particular problem s, after w hich questions and dis­cussions from the floor w ill fo llo w . T h e Association believes that this innovation w ill d o much to stimulate citizen participation in public affairs dealin g w ith taxation, both in W a sh in g to n , our state, and on the local level. It presents to the tax­payers o f N e v a d a an opportunity to become acquainted w ith m any facts w hich are not customarily k n ow n b y the layman. R E V E N U E A C T O F 1945 C O N T A I N S I M P O R T A N T C H A N G E S It is im probable that Congress w ill pass any im portant tax legislation d u rin g 1946 w hich w ill b e effective in 1946. M o st o f the changes w hich w ill affect your 1946 tax b ill w ere included in the Revenue A c t o f 1945. H ig h lig h ts o f the changes fo r 1946, together w ith estimated reductions o f receipts b y the Treasury are as fo l­lo w s : ( 1 ) R epeal o f excess profits tax as o f January 1, $2,555,000,000. ( 2 ) R epeal o f capital stock tax and declared value profits excess tax com m encing w ith the fiscal year ending June 30, 1946, $234,000,000. ( 3 ) Reduction o f cor­porate surtax rates (first $25,000 o f net incomes o f $50,000 o r less from 10 p er cent to 6 per cent and in net incomes over $50,000 from 16 to 14 per cen t), $347,000,000. T o ta l corporate tax reductions $3,136,000,000. ( 4 ) N o r m a l tax exemptions m ade same as present surtax exemptions, p ro b ­ably relieving 12,000,000 persons fro m necessity o f filing returns, $782,000,000. ( 5 ) Reduces surtax rates 3 per cent-age points in each bracket $1,303,000,000. ( 6 ) T a x credit o f 5 per cent com bined norm al and surtax, $559,000,000. T o ta l individuals’ income tax reductions $2,644,000,000. ( 7 ) R epeal o f use tax on m otor vehicles and boats, $140,- 000,000. T o ta l tax reduction fo r 1946, $5,920,000,000. O th er notew orthy p ro v isio n s'o f the 1945 Revenue A ct are freezing o f the Social Security tax rate, at 1 per cent fo r 1946, extension fo r a year o f the unused excess profits tax credit carryback so that a 1946 credit may reduce jl944 or 1945 tax, and the forgiveness o f fe d e ra l income tax payments on certain m ilitary service pay fro m 1940 to 1946, inclusive. U N E M P L O Y M E N T C O M P E N S A T I O N D E P A R T M E N T C H A N G E S E X P E R I E N C E R A T I N G F O R M U L A Retroactive to January 1, 1946, the U nem ploym ent Com pensation D epartm ent o f the state has revised the fo rm u la fo r those em ployers eligible fo r experience rating. T h is experience ratin g w as p rovided fo r by the 1945 session o f the legislature. Experience ratin g applies to those em ployers w h o have m ade contributions to the fu n d fo r thirty-six consecutive months. A l l other em ployers retain the form er flat rate o f 2 .7 % . I n July, 1945, w h en this amendment to the Com pensation A c t became effective, the Em ploym ent Security D epartm ent instituted as a basis fo r experience rating w hat is k n o w n as the "ben efit ratio” form ula, the ratio bein g the quotient obtained by dividin g the total am ount o f the benefits charged to the em ployer’s account by the am ount o f the em ployer’s annual payroll fo r the same period. U n d e r authority o f the nine classifica­tions pro vid ed fo r by statute, the em ployers fe ll into one o f the nine grou ps ra n g in g from 1 percent to 4.5 per cent. T h e n ew form ula, k n o w n as the "reserve ratio” fo rm ­ula, takes into consideration a n ew factor, that o f the reserve. T h is fo rm u la is the ratio w hich the total contri­butions, less benefits paid, bears to the average p ay ro ll fo r the past three years. A n im portant feature o f the change is the elim ination o f the so-called "pen alty rates,” these rates b ein g a ll per­centages above 2.7. T h e procedure n o w in effect is predicated on six months post-w ar benefit claims. Estimated contributions fo r 1946 am ount to $480,000, instead o f $600,000 under the o ld form ula. A d d in g to the $480,000, $680,000 estimated con­tributions fro m ineligibles, and $200,000 interest on the fu n d ’s reserve, the net income fo r the year w o u ld be $1,360,000. I f the January benefit lo ad represents an average fo r the year, the total benefits payable d u rin g 1946 w o u ld be $600,000, o r an increased reserve o f $760,000. T h is W ou ld be added to the am ount n o w on deposit in W a s h in g ­ton, which exceeds $10,500,000. T h e n ew form u la has fo r its low est contribution rate the 1 per cent pro vid ed fo r by statute, an d is applicable to those em ployers h avin g a reserve ratio percentage o f 12 per cent o r above. T h e second classification is less than 12 per cent, bu t m ore than 10 per cent, fo r w hich the rate is 1.5 per cent. T h e third is m ore than 7.5 per cent but less than 10 p e r cent, the rate fo r w hich is 2 per cent. T h e m axim um rate is w h ere the reserve tatio is less than 7.5 per cent, and such em ployers pay at the rate o f 2.7 p e r cent.