**19 January Update**

I was going to add a note this morning asking how the Raiders were never discussed, but good thing I waited:

..Withdrawn.

[End note]

Every headline I have seen from our 2017 Nevada “State of the State” is about the proposed 10% excise tax on the sale of recreational marijuana. It’s good politics, and not all that controversial.

Nor is it the most important item discussed by Governor Sandoval last night!

Sure, I’m happy to talk a little about the excise tax and school coupons1)I assumed the media companies are meeting consumer demand. I suppose I should too, but before that, I want to highlight the more important topics discussed by our Governor last night.

Governor Sandoval may not be at the Obama-level of speechifying, but there is so much more to government than talking.

Dare I say, perhaps absent Maryland2)I don’t know enough about Gov. Hogan to do a full analysis. What I have seen is very impressive., we have the best Republican Governor in the country3)Andrew Cuomo says “let’s see one of you open a subway”! All of us, including me here in a little bit, can nitpick Governor Sandoval’s public policy, but I just want to say publicly how much I appreciate his good governance.

Politicians are role models, and Mr. Sandoval has just been terrific model for the young people of this state. I know I look up to him.4)I don’t share his politics, mind you.

I do think some of what he proposed last night is mistaken, but the governor has shown himself to be amenable, to his credit.

If our governor was of the ilk of Lepage or Bently5)these are just two, I wouldn’t even waste my time entertaining what they said.

But it’s because Governor Sandoval is a serious man trying to solve serious problems, that I believe yes, he deserves our engagement.

But first, the important item that did not get enough press in the speech, that should have!

ICYMI: The Tesla Expansion Is Changing the Character of Our State for Good!

As exciting as the marijuana tax is6)why is this so interesting?? Somebody explain why there is so much content out there about this one small item. Yes, we’ll get to it., it’s the Tesla news that matters to our future much, much more.

I was initially skeptical about Nevada’s Tesla investment; I was wrong. The governor was right. His legacy will be attached to getting Tesla to build that battery factory here, and likely for the good.

There were two people recognized during the speech. First, of course, was the honored guest and World War II veteran, Phyllis Anker Bendure. The other? Tesla’s chief technology officer. And with good reason. The Governor informed us that Tesla will build the electric motors and gearboxes for the Model 3 at our Nevada gigafactory.

The governor’s team announced that the new investment from Tesla came without any additional tax credits.

I recently read Peter Thiel’s book7)It’s excellent, and I found his endorsement of Elon Musk very persuasive. In his book, Thiel distinguishes between indefinite optimism and definite optimism, and shows why the latter is so much more desireable than the former.

Mr. Musk, of the “Paypal mafia,” is the type of man we want to invest in. He intends8)according the Thiel to control every element of production, all the way through sales. The specified 550 good-paying jobs announced could just be the beginning. At some point, Mr. Musk is going to want to stop paying those high rents in Palo Alto, and we want to be the location he sets up shop.

When he scales up, we want to be his partner. Governor Sandoval deserves a ton of credit for getting us in this position.

The governor’s budget asks for enough money to build an engineering school up north. My sister left the state to get an engineering degree; we can’t have this. It’s time for Nevada to start keeping its best and brightest from moving away!9)I graduated International Baccalaureate from Green Valley High School in 2003 with some of the smartest kids I have ever met. Not one of them lives here anymore.

Nor does it just have to be Tesla! Just imagine what happens when other members (and likeminded) of the “Paypal mafia” see that Nevada is the “get it done state.”

If we are serious about attracting these tech companies, it’s time to start talking about county-wide broadband in Clark and Washoe. And we need to make sure our kids are fully computer literate. Which brings me to my next topic..

The School Coupon People Are Still At It

There has been so much bad faith in the ESA conversation, that I just stay away.10)What good does it do anyone if I call people names? I’m not convinced any of these people are serious about educating your kids.11)They seem very serious about getting their hands on your tax money, however. The ESA program devised by the legislature was obviously unconstitutional12)they added language to the law saying the constitution didn’t apply..right, bad faith., and the Nevada Supreme Court said so in the least shocking case in Nevada history.

By the way, the state spent more than a million dollars of tax revenue to hire outside counsel to lose this case for you.

You’re welcome?

Anyway, I’m not sure why your electeds13)Yes I am are muddling this issue, but all that’s been decided is that if the legislature wants to hand out school coupons, they need to find an independent source of revenue for it that’s separate from money allocated for public education. Let’s see what the governor said about it:

As promised, my budget includes $60 million to fund Nevada education savings accounts. I’m asking you to work with Senator Scott Hammond and me to modernize our education system with the implementation of ESA’s. We’ve heard from thousands of Nevada families about how crucial it is that we give them freedom of choice in the education of their children. I look forward to building a bi-partisan solution to get this done. It’s time to give Nevada families more choice.

I could not disagree with this more, with respect. I had a parent a few months ago challenge my distaste for ESAs, saying “what other choice do I have?”

Her point is fair. Until I have an alternative, I’m done criticizing school choice. The democrats need to engage better on this issue; our schools are not up to par. If the liberals want to save public education, they better come up with some solutions. And fast.

There is zero evidence that more choice leads to better results. Zero. There is some evidence out there for regulated charters achieving results. And if the school choice people come back with an option that looks like Boston, I’m all ears!

The Nevada ESAs sound more like what happened in Michigan, where the republicans just want education completely unregulated and failing.

…This might shock you, but I don’t think this is a good idea.

And neither do the democrats. Leader Ford said “of course we’re going to oppose it…It’s unlikely to get any Democratic votes in the Senate.” Good, maybe we can just

I just don’t think we should be doing radical education experiments on our kids. Let someone else go first. Or at least let Michigan get it right before we adopt their model.

Companies like Tesla will need our labor force to have advanced skills to a large degree, or they will go somewhere that does.

Of the best educated countries in the world, none use the ESA model14)h/t Diane Ravitch. It’s never been proven to be successful.

Note that proving what doesn’t work doesn’t show what does, we’re just back to phase 1.

Governor Sandoval Proposes a 10% Excise Tax on Marijuana to Pay for ESAs

On top of the 15% tax.

This pattern is happens over and over again. First, the electeds are against marijuana legalization until they see the revenue numbers. Next, they see revenue projections. Lastly, they want to double down and add more taxes to get even more revenue.

It’s good politics by the governor. I think it’s only a very small percentage of people would be against this. Now, I’ve been following the debate about what effect this will have on the marijuana market, and all I see are hot takes with very little substance.

Image result for optimization curve

What you are looking at is a basic optimization curve. The goal with marijuana tax revenue is to optimize. If the tax is too high, there will be a black market demand from which we do not capture any revenue, .7 or .8 on the graph above.15)In New York where it is $13/pack last I heard, there’s a black market for cigs

Conversely, the tax is too low right up until the point where it dissuades purchase, .3 or .4 above.

The goal being for the market to operate where t is on the graph, that is where Nevada makes the most money from marijuana sales.

Will a 25% tax be too high? It’s going to depend on price16)which is a product of supply and demand, and we just don’t know what the rack rate will be yet. There’s no way to tell right now.

States with legal marijuana still have issues with the black market. The high tax might be part. So long as we are flexible, there shouldn’t be a problem. We just need to be willing to adjust the tax as necessary.

I’m not necessarily offended by the governor wanting to use the excise revenue to fund ESAs (at least it’s constitutional), but I do have to point out that it’s wasteful. Giving money to for-profit, unregulated charters has not shown to be a good investment for a community.17)Read more here

I propose instead of writing checks to for-profit education companies with no track records, that we invest in technological infrastructure.18)broadband! Let’s spend on what we know for sure we’ll need, before taking chances on these ESA people.

It’s not that we don’t need to reform our education system, we just haven’t been presented with a real option to do so yet. You’re up, team blue.

Thanks for reading! See the full speech/pictures below.

 

 

 

Footnotes   [ + ]

1. I assumed the media companies are meeting consumer demand. I suppose I should too
2. I don’t know enough about Gov. Hogan to do a full analysis. What I have seen is very impressive.
3. Andrew Cuomo says “let’s see one of you open a subway”
4. I don’t share his politics, mind you.
5. these are just two
6. why is this so interesting?? Somebody explain why there is so much content out there about this one small item. Yes, we’ll get to it.
7. It’s excellent
8. according the Thiel
9. I graduated International Baccalaureate from Green Valley High School in 2003 with some of the smartest kids I have ever met. Not one of them lives here anymore.
10. What good does it do anyone if I call people names?
11. They seem very serious about getting their hands on your tax money, however
12. they added language to the law saying the constitution didn’t apply..right, bad faith.
13. Yes I am
14. h/t Diane Ravitch
15. In New York where it is $13/pack last I heard, there’s a black market for cigs
16. which is a product of supply and demand
17. Read more here
18. broadband!
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