CARSON CITY -- Nevada went from being one of the least taxed states to one of the more highly taxed states after legislative approval of the record $833 million tax increase in 2003, a Maine study has found.

The state and local tax burden on residents was 9.8 percent of annual personal income, or 36th among states in the 2002 fiscal year, but increased to 10.6 percent, or 20th, in the 2004 fiscal year, according to the Maine Heritage Policy Center.

J. Scott Moody, vice president and chief economist for the policy center, said Monday that the tax increase had a clear effect on Nevada's national ranking. The full effect of the tax increase, however, is not yet known since the increase was implemented over a two-year period that was not entirely reflected in the Maine study, he said.

"The fundamental problem with high taxes is you reduce the ability of business to do what business does best, create jobs and wealth," Moody said. "There is a distinct relationship between the two.

Moody said that between 2002 and 2004, personal income grew in Nevada by 15 percent, or twice the national growth rate of 7.4 percent.

But state and local tax collections over those years grew at a much faster rate of 24.3 percent, compared to 12 percent nationally.

The Maine Heritage Policy Center describes itself as a nonprofit educational association that offers conservative, free-market policies on economic, education and other issues. Moody said the study found Maine ranks second to New York in tax burden.

Despite his dire warnings about higher taxes, Nevada's economy has been booming since the 2003 tax increases.

Unemployment now is 4.2 percent and consistently has been less than the national average, even dropping to a 30-year low of 3.6 percent for a couple of months last year.

At the same time, job creation in Nevada has paced the nation, running three times or higher than the national job creation average of 1.6 percent. Job creation rates topping 5 percent are expected to continue in 2007 and 2008, according to an analysis issued in October by the state Employment Security Division.

Until a slowdown earlier this year, sales by Nevada businesses had posted double-digit increases, compared with the same month the previous year, each month for 21/2 years.

"Your (taxation) ranking is moving up," Moody said of Nevada. "If you continue to move in that direction you will pay the price in poor performance economically."

Asked for comment on the Maine study, a spokesman said Gov.-elect Jim Gibbons was not available for comment. But he did say that Gibbons will not propose or support any tax increases in 2007, when the Legislature is scheduled to convene.

"He has not advocated any new taxes," said Brent Boynton, Gibbons' communications director. "The overriding consideration of the governor-elect is that Nevada must fulfill its promise to the people and that is no new taxes. Nevada has to live within its means."

Moody noted that during the 1994-2004 period, Nevada ranked 11th lowest nationally in the tax burden on individuals. The tax increase in 2003 came near the end of Moody's study period, so it did not have a big effect on Nevada's 10-year standing.

His study used data collected by the U.S. Census Bureau.

The Census Bureau in 2005 reported Nevada's state and local tax burden on a per capita basis was $2,075, or $114 under the national average.

Gaming taxes, which are paid predominantly by visitors, were included in the tax burden.

Jim Shabi, a state economist, said a considerable amount of gaming and sales taxes are paid by visitors, but he does not know what that amount is.

The Nevada Gaming Control Board does not keep records on the percentage of gaming taxes paid on industry winnings. About 31 percent of Nevada state government taxes come from gaming.

During the 1999 legislative session, the Nevada Resort Association presented a report that contended more than half of state taxes were generated by the gaming industry, including sales taxes paid by visitors. The presentation was made to head off an attempt by state Sen. Joe Neal, D-North Las Vegas, to increase the gaming tax by 2 percentage points.

The Maine results on Nevada's tax burden were similar to a Tax Foundation study that found the Nevada individual local and state tax burden in 2005 was 10.7 percent. The Tax Foundation is a nonpartisan educational organization.

But Retirement Living magazine in 2005 reported the Nevada individual and local tax burden at 9.5 percent, more than a percentage point below the national average.

In the Maine tax study, Moody compared taxation's effect on the economy with throwing sand into the cogs of a great machine.

"The sand does not stop the machine; however, it does reduce its efficiency and output," he said. "Correspondingly, taxation reduces the efficiency and output of the economy."

Steve Miller, vice president of the Nevada Public Policy Research, said there are a lot of factors that explain why Nevada's economy has boomed, despite the record tax increases. He mentioned that the gaming industry seems to be impervious to economic downturns and people will gamble regardless of their economic circumstances. During the Great Depression of the 1930s, the movie industry flourished, and gaming is a form of entertainment like the movie business, he added.

"Another factor is we are sort of a wart on California's behind," Miller said. "The worse it gets in California, the more people will relocate here."

Miller said economists believe Nevada will continue to have a good economy because of "people fleeing California."