In the turbulent late-1960s, Paul Laxalt’s tenure as governor (1967-1971) was best remembered nationally for his phone conversations with the eccentric and wildly-rich Howard Hughes encouraging his acquisition binge of Nevada gaming properties that helped rid Las Vegas of mob influences.
For Nevadans, Laxalt is recalled as the youthful lieutenant governor who defeated two-term Democratic Governor Grant Sawyer in November 1966.
Writing later about his time as governor in “Nevada’s Paul Laxalt: A Memoir,” Laxalt noted that economic recession in 1966 had greatly reduced state revenues and that even with cuts his first budget could not be balanced.
“We came to the painful conclusion that we needed more revenue,” Laxalt wrote. “How could a conservative new governor justify a new tax increase in his first year in office? There was no way out.”
Seeking advice, Laxalt called his friend Ronald Reagan, who had just been elected governor of California. Reagan was in a similar predicament. “My political pain was eased somewhat when I called Ronald Reagan,” Laxalt wrote. “He said ‘I have the same problem and I’m going to ask for a tax increase. It’s the responsible thing to do.’”
And so it was that Laxalt in Nevada and Reagan in California both raised taxes in their first 1967 state budgets. It was the responsible course of action.
Laxalt proposed distributing the pain equally. “In order to make the tax hike ‘fair’, I tried to spread the burden as broadly as possible,” he wrote. A bipartisan two-thirds majority of Nevada’s legislature supported Laxalt, raising the gaming tax by 20 percent and the sales tax by 50 percent (from 2 to 3 cents).
With these additional revenues, Laxalt was able to keep his campaign promises.
The Laxalt legacy includes the beginning of the Nevada community college system; the building of the state’s first medical school at the University of Nevada, Reno; the modernization of gaming with “corporate licensing”; a bi-state compact with California to protect Lake Tahoe from over-development and establishment of the Tahoe Regional Planning Agency; the addition of 12,000 acres of state park land at Lake Tahoe; reforms at the antiquated Carson City prison; and his “Lighthouse of Education” pledge to raise teacher salaries and lower classroom size.
As for Reagan, after defeating two-term Democratic Governor Pat Brown in November 1966, he inherited a $400 million deficit in 1967 ( more than $3 billion in 2018 dollars). Initially, he attempted a 10 percent across-the-board spending reduction, but no amount of spending reductions could have balanced California’s budget.
Reagan then proposed the largest tax hike by any governor in the history of the United States up to that time. His $1 billion tax plan (more than $7.5 billion in 2018 dollars) provided for tax increases on sales, personal income, banks and corporations, insurance companies, liquor, and cigarettes. It was approved on a bipartisan two-thirds vote in both legislative chambers. Ultra-conservative critics declared Reagan a turncoat.
Notably, the Reagan tax increase generated substantially more than was needed to close the inherited deficit, and provided funding for major initiatives during his two terms as governor from 1967-75.
The “Reagan record” later included delivering on his promise of property tax relief; additional school district funding to satisfy a court decision; and 145,000 acres added to state parks prior to Golden State land prices soaring. It was the largest land acquisition by any modern California governor.
Two conservative Republican icons, Nevada’s Paul Laxalt and California’s Ronald Reagan, showed that real leaders do the “responsible thing”—which may include increasing taxes when required.
Laxalt and Reagan took bold steps to right their respective state ships back in 1967.
Jim Hartman is an attorney residing in Genoa