State tax structure praised

CARSON CITY -- Despite Nevada's reliance on volatile sales and gaming taxes to fund much of its budget, the state's revenue structure is superior to those of many other states by at least one measure, a study sponsored by the Las Vegas Chamber of Commerce has found.

The study, released Thursday, found that Nevada's tax system is the ninth most stable of all the states when looking at state tax collections per capita, adjusted for inflation.

It also found that Nevada ranked 27th nationally for state tax collections per $1,000 of personal income, and ranked 43rd nationally in state tax collections as a percentage of gross state product.

Although these other types of analysis showed the state's revenue structure to be less stable than other states', "this system has generally worked well for Nevada in most years, providing the capacity for substantial growth, bolstering economic development and providing a comparably stable revenue stream," the study said.

"The results of this analysis suggest that Nevada's state tax system does not sit at either end of the spectrum," the report said. "It is neither among the nation's most stable systems, nor is it among its most volatile."

The issue of revenue stability has become even more pressing because of the current economic crisis. Lower than expected gaming and sales tax revenues have forced Gov. Jim Gibbons and the Legislature to cut spending and tap emergency funds totaling $1.2 billion so far. Officials learned this week that the budget will have to be trimmed by another $250 million.

"Now is a good time to analyze our state budgeting process to see if it can be improved," said Hugh Anderson, chairman of the Chamber's Government Affairs Committee. "This analysis should include a look at the rainy day fund size and process.

"We should also consider establishing a budget stabilization fund specifically dedicated to K-12 education," Anderson said. "By setting aside money in good years specifically for education, we protect our schools from having to endure draconian budget cuts during lean times, such as we are facing today."

The study by Hobbs, Ong & Associates and Applied Analysis also found that the assumption that local government finances are more stable because of a reliance on property taxes as a major revenue source does not hold up under analysis.

"Revenue sources are an important consideration; however, the idea that simply trading sales tax for property tax between the state and local level will somehow improve the state's lot lacks foundation."

The complete report can be found on the Chamber's Web site at www.lvchamber.com.