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Study: Nevada beats U.S. income-distribution average

When it comes to equitable income distribution, Nevada and its metropolitan areas are slightly better off than the national average. However, the U.S. as a whole still lags behind much of the world when it comes to income equality, the latest High Net Worth Report released by The Private Bank at Nevada State Bank shows.

The survey also found that despite large tax increases for wealthy taxpayers, the recent expiration of the Federal Insurance Contribution Act, or FICA, has hit Nevada’s lower income brackets with a greater share of the tax hike.

“The FICA increase applies only to the first $112,700 in wages earned,” said Jeremy Aguero, principal analyst with Las Vegas-based Applied Analysis. “This means that lower-income working households end up paying a higher relative tax rate.”

Aguero, the report’s lead researcher, said with investment earnings also not subject to federal payroll tax, the burden is shifted even further to lower-income families.

He cautioned that this element of tax reform should not be viewed in isolation as higher marginal income tax rates, capital gains rates and some limitations on deductions disproportionately affect higher-income workers.

The average Nevadan earning less than $500,000 in income can expect the full 2 percent impact of the payroll tax, about $610 annually for the average salary of $30,511. Those making $500,000 to $1 million will experience a 1.2 percent tax increase on average, and those making about $1 million will experience a 0.5 percent increase on average, the study found.

Overall, those making less than $500,000 in Nevada will be responsible for paying 98.9 percent of the expected increase, in spite of making only 97.2 percent of the state’s reported income.

“The payroll tax increase remains a material consideration for high-income families, not only due to increased personal liability, but also because it reduces the take-home pay of employees and will pull roughly
$1.8 billion out of Nevada’s economy each year,” said Russell Price, executive vice president of The Private Bank at Nevada State Bank.

In terms of income inequality, Nevada placed 33rd nationally at 44.6 on the Gini Index. The overall index is 47 in the United States.

Puerto Rico (53.4) and Washington, D.C., (53.2) reported the highest degrees of income inequality. Alaska (41.2) and Wyoming (41.4) reported the lowest.

The Gini Index, which is calculated by the Census Bureau, ranges from zero, or perfect equality, to 100, or perfect inequality.

In Nevada, Carson City reported the lowest rate of income inequality at 43.7, followed by Las Vegas at 45.4 and Reno at 46.7.

Contact reporter Chris Sieroty at
csieroty@reviewjournal.com or 702-477-3893.
Follow @sierotyfeatures on Twitter.

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