Nevada continues to rank fourth among states for its generally good business tax climate, but the state's sales tax ranks among the most onerous, a study being released today finds.
The Tax Foundation, a nonpartisan group that has representatives of large businesses such as Exxon Mobil Corp. and Microsoft Corp. on its board, ranked Nevada's tax climate for business as the nation's fourth-best, unchanged from the past two years. Wyoming ranked first, followed by South Dakota and Alaska.
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California ranks 45th because of its relatively high taxes. The only state abutting Nevada that ranks among the top 10 states for tax favorability, the study said, is 10th-place Oregon.
States in the top 10 are showing higher income, job growth and economic growth than states in the bottom 10, said Chris Atkins, staff attorney and the study's co-author. Nevada is among a few states that levies no state corporate or personal income tax. Property taxes in Nevada also are relatively low, the study said, but Atkins was surprised by the high sales tax in Nevada.
The Silver State's sales tax burden ranks among the worst at 47th, according to the Tax Foundations' 2007 State Business Tax Climate Index. Only Rhode Island, Massachusetts and Kentucky have more burdensome sales taxes, according to the Tax Foundation.
"If Nevada wants to focus on working to make itself more competitive, (sales taxes are) where you need to focus," Atkins said.
Carole Vilardo, president of the Nevada Taxpayers Association, agreed with Atkins.
"We're getting too high on the sales tax rate," she said. "This is a point in which we are reaching diminishing returns. We think they're are too many local options," tacked onto sales taxes, such as the Metropolitan Police Department manpower increase and transportation programs.
However, Vilardo noted that 28 percent of sales taxes are paid by tourists and another 33 percent are paid by businesses, rather than individuals, according to a 1990 study by PriceWaterhouseCoopers and the Urban Land Institute.
"We've been fortunate that we've had a good economy, and people purchase things in a good economy," she said.
Nevada's sales tax rate is 2 percent, but local taxes in Clark County boost that to 7.75 percent, the highest in the state. Washoe and White Pine counties come next at 7.375 percent. Sales taxes total 6.75 percent in Nye County, where Pahrump is. Seven counties in Nevada collect a total of 6.5 percent in sales tax, including the state's 2 percent.
Nevada rates 40th for its fairly onerous unemployment insurance taxes, the study said.
Its property taxes rate among the 13 most favorable, the study said. The Nevada Legislature in 1981 decided to switch from property taxes to sales taxes as the main income source for local government.
Although Nevada gets praise for its low taxes, critics also complain that low taxes lead to substandard public education. In July, the Clark County School District reported that 160 of its 333 schools failed to meet federal benchmarks set forth in the federal No Child Left Behind law during 2005 and 2006. According to the National Center for Education Statistics, Nevada consistently ranks at the bottom in per-pupil allocation at $6,308 per student, compared with $12,028 for New York, which has one of the highest allocations.
Tax Foundation spokesmen acknowledged that good schools and an educated work force also are factors in attracting business, but the foundation did not study those factors.
