Debate over taxes in the 1997 Nevada Legislature brought forth the claim once again that the "per capita tax burden" in Nevada is unusually high by national standards, but is this true? In response to many inquiries, here are the facts.
"Per capita tax burdens" for individual states are calculated by several federal offices in Washington and by more than a few so-called national think tanks, although the comparative figures are not necessarily updated every year.
The most recent figures were distributed by the U.S. Census Bureau, among other offices, for calendar year 1994. Updated comparative figures for 1996 are expected to be released by late summer or early fall of this year. Meanwhile, the 1994 figures, reflecting all taxes collected by state, county and city government in each state divided by state population, are listed on the bottom of page 17.
What does it mean?
Nevada's calculated per capita tax burden of $1,680 in 1994 was $211 higher than the national average for all 50 states, $1,469. Obviously, out-of-state visitors contributed to gaming tax revenue in 1994 for both New Jersey and Nevada, just as oil revenue contributed to total tax revenue in Alaska and "incorporations" contributed to the total tax revenue in Delaware.
But these factors alone do not fully explain the high per capita tax burden of such states. Nevada's high ranking has remained consistently high in recent years, reflecting what is also its high ranking when it comes to per capita spending.
The truth of the matter is that Nevada's per capita tax ranking has been going up ever since implementation of its so-called tax shift. What follows are the state's rankings in several recent years:
Not surprisingly, these figures correlate closely with per capita spending figures for state and local government. Nevada's per capita tax burden ranking of 14th highest in 1992, for example, correlated closely with the state's 12th highest per capita spending for that year.
State Government is the Burden
One of the most interesting statistics to be found in any comparative tax study is what percent of all revenue collected is by state. In Nevada, 67.2 percent is collected by state government, the 17th highest percentage among the 50 states and suggesting the likelihood that on a per capita basis state government in Nevada is over-funded while local government may be somewhat under-funded.
A sampling of just a few of the state tax increases enacted in the first dozen years following the so-called tax shift tells the story:
- State gas tax, 6 increases, up 290%
- Insurance tax, 2 increases, up 75%
- Basic auto registration fee, up 310%
- Driver license, 4 increases, up 250%
- Cigarette tax, up 350%
There were increases in the liquor, wine, beer and cordials taxes, general sales tax and virtually everything else from hunting and fishing licenses to court cost fees which soared upward in varying amounts ranging up to 950 percent.
As a result of this tax rampage, Nevada's tax revenue soared upward four times as fast as its population between fiscal year 1981-82 and fiscal year 1992-93. Here are the relevant growth percentages for that 11-year period as calculated by the U.S.
|Nevada state tax revenue||up 223%|
|Nevada Population||up 59%|
|U.S. Consumer Price Index||up 49%|
During the decade of 1980 to 1990 Nevada's tax revenue growth of 190 percent ranked fourth highest among the 50 states.
Stacking the Deck Against the Poor
Nevada's inordinately high excise taxes are often rationalized by virtue of the fact that the state has no income tax. But there are eight states with no income tax, six of which have much lower per capita tax burdens than Nevada's. Texas, which shares Nevada's population growth problems and has no income tax, has the next-to-lowest per capita tax burden among the states.
In several areas of taxation, Nevada has compounded the tax burdens of its citizens structurally. For example, Nevada has one of the 15 highest state sales taxes in the U.S., and then compounds the expense for shoppers by also being one of the 23 states to permit the levying of county sales taxes.
Similarly, Nevada has one of the seven highest state gasoline taxes in the U.S. and then compounds this expense for motorists by also being one of only 13 states to permit the levying of county gasoline taxes on top of its state gas tax.
In counties with a 10-cent county gasoline tax (Washoe County, for example), this means paying $1.00 to $1.50 weekly; for a two-car household that may be $3.00 weekly or up to $150 a year for a tax that doesn't even exist in 37 states. It doesn't take much of this sort of thing to transform a low-tax state into a high-tax state.
Probably most objectionable in Nevada's tax structure is the state's failure to exempt from sales taxes commodities on which excise taxes have already been paid. For example, here is the total retail cost of a six-pack of beer in most states:
- Cost of the beer
- Federal tax on beer
- State excise tax on beer
But in Nevada there is no protection against paying taxes on other taxes, so that the retail cost of that beer looks like this:
- Cost of the beer
- Federal excise tax on beer
- State excise tax on beer
- State sales tax on beer
- State sales tax on federal excise tax
- State sales tax on state excise tax
- County sales tax on beer
- County sales tax on federal excise tax
- County sales tax on state excise tax
In Nevada, retailers simply add the state and county sales tax onto everything else as you leave the store. Most states have avoided the obnoxious practice of levying taxes on top of other taxes by simply exempting from sales taxes commodities on which other taxes have been paid.
Only marginally less objectionable to many Nevada taxpayers is the state's practice of taxing insurance premiums. Insurance is a necessity, of course, which is why only six states levy such a tax. Nonetheless, in Nevada it is a major money maker for the state, often covering as much as seven percent of the state's general operating budget. This is a "hidden tax," one incorporated into all insurance premiums by insurance carriers but never documented for taxpayers. So is Nevada a high-tax state? Clearly it is, one of the 12 highest in the U.S.
Ralph Heller is Senior Consulting Editor of Nevada Journal.