Nevada’s Fiscal Crisis

Executive Summary

Executive Summary

Nevada’s current budgetary crisis consists of $170 Million in revenue shortfall.

Nevada lacks a unified budgeting and accounting system which would allow its citizens to take a comprehensive look at the state’s finances. It is difficult for experts, let alone the typical voter, to figure out how much money we really have and where it goes.

Nevada ranks 17th nationally in terms of state and local revenue from all sources. This suggests that Nevada has a lot of resources to work with to meet its needs.

The key to understanding where Nevada’s money comes from is to note that we are ranked 6th in general sales tax revenue and 1st in “selective sales.” Because of these two taxes, we rank l4th in the nation in per capita revenues from our own, in-state, sources.

The high level of state and local revenues per capita is obviously due to the gaming industry. Because of gaming, most of the other sectors of the state economy have been enjoying something of a tax holiday.

Taxes from the tourism industry move Nevada from a rank of 32nd in own source revenues to 14th yet tourism does not export a significant portion of taxes out of state as originally believed.

Government Finances: 1989-90 shows using combined state and local revenue data gaming contributes 11% of all own source revenues.

It is true that the tourism industry generates a significant percentage of Nevadan’ household income, but the point is that the vast majority of tax revenues come from, and/or at the expense of Nevadans’ household incomes.

80% to 90% of all own source revenues come from Nevada households and (non-gaming) businesses.

Aside from mining and gaming, Nevada’s money also comes from another industry specific tax on insurance premiums. $53.2 million in insurance premium taxes paid in 1989-90 came largely from Nevadan’s household incomes.

The fallacy of reliance on industry specific taxes is the belief that the targeted industries bear the burden of the tax. What industry specific taxes actually do is to target the burden of taxes on workers and owners in particular sectors of the economy, retarding growth and employment in that and related industries.

Nevada ranks 9th in highway spending, 5th in spending for police; 2nd in spending for fire, 4th in spending for corrections, and 3rd in spending for parks and recreation.

Most Nevadans want police, fire and corrections, and parks and recreation spending, but, perhaps not as much as they are paying for.

If the state wants to spend more on education, health, and welfare it needs to control spending in the areas where spending is high.

There is no shortage of non-tax policy options that may free up existing revenues for use in areas where Nevada’s expenditures are low.

No matter how a tax increase is packaged and “sold” to Nevada voters, the burden eventually comes home and is taken from Nevadans’ household incomes in the form of higher insurance premiums, lower wages and lost jobs.

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