Under-the-radar taxation

Geoffrey Lawrence

While recent attention has focused on the state's revenue shortfall and the related debate over whether to increase taxes, the fact that state lawmakers have already raised taxes has gone relatively unreported in the media. 

Last week during the legislature's 25th Special Session, state lawmakers made several changes to the way Nevada retailers collect taxes.  These changes amount to tax increases on retailers.  Previously, retailers in the state were allowed to keep a small amount of the sales and excise taxes they collected to offset the administration costs of collecting the taxes.  State lawmakers last week changed these rules by passing legislation that requires retailers to forego a significant portion of this break. 

The legislation reduced the amount that retailers are allowed to keep from 0.5 percent of tax collections to 0.25 percent of tax collections.  This reduction applies to retailers who collect the states' streamlined sales and use tax as well as to those who collect taxes on tobacco and liquor products.  However, the legislation does nothing to lessen the administrative cost that retailers must bear to collect and organize these taxes.  Hence, the effect is a tax increase on all Nevada retailers.

The legislation also included a similar tax increase against car rental agencies.  Rental car agencies are able to collect 4 percent surcharges on the cost of a rental car in order to recover the cost of vehicle licensing.  Previously, state law required that one-quarter of this amount be remitted to the state highway fund.  The new legislation doubles this tax burden on rental car agencies because it requires that they remit half of the money collected under the 4 percent surcharge.  The tax increase will be diverted to the state's general fund so that state government can continue to afford extravagant pay raises for government employees.  Once again, the new legislation does nothing to offset the licensing costs that car rental agencies must bear.  This is simply a tax increase.

Little attention has been paid to these tax increases, although it is clear that they will raise the cost of doing business in Nevada.  In a period of economic recession, Nevada state government seems intent on driving business and tourism away from the state – a recipe for disaster that can't be denied.

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.