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Study: Nevada’s tax burden low

CARSON CITY — Forget all that talk about taxes in Nevada being higher than the Himalayas.

A new study shows Silver State residents actually have the second lowest state and local tax burden in the nation.

Nevadans paid 6.6 percent of their income in state and local taxes during the fiscal year that ended June 30, according to the Tax Foundation, a nonpartisan education association based in Washington, D.C.

That rate was second lowest to Alaska’s 6.4 percent rate. The national average was 9.7 percent.

Nevada has ranked as the third, second or lowest taxed state in all of its annual surveys for the last 30 years, according to Bill Ahern, a Tax Foundation spokesman.

"There is no question Nevada is a low taxed state," he said Monday.

Ahern said that unlike other studies that tend to place Nevada in the middle of states in terms of total taxation, his organization’s study credits gaming taxes — paid mostly by out-of-state residents — to the states where gamblers actually live before it calculates the percentages.

About 27.4 percent of Nevada’s revenue comes from gaming taxes.

The Tax Foundation also did not figure in lodging, rental car and sales taxes paid by tourists spending time in Nevada in calculating the tax burden of Nevadans.

Ahern said these calculations are difficult to make, but they give a truer picture of the tax burden on actual residents in each state.

The states with the lowest tax burden all are among the nine without a state income tax, or five without sales taxes, he said. Nevada has no state income tax; Alaska has no sales tax.

The 6.5 percent state sales tax rate in Nevada is slightly above the 6 percent national average, according to the Tax Foundation study.

But add-ons assessed by local and county governments bring the Nevada sales tax rate to an average of 7.56 percent.

That overall rate is not out of line with the rest of the nation, Ahern said.

New York local governments added 4 percentage points to the state’s 4 percent sales tax rate. In parts of Massachusetts, the sales tax rate is 9.75 percent. California has a 7.25 percent sales tax rate, but add-ons have brought the tax rate to more than 9 percent in some cities.

The Tax Foundation bases its results not on total state and local tax collections, but on taxes actually paid by individual taxpayers.

That means that payroll, unemployment and other taxes paid by Nevada businesses were not counted in determining the rankings. These taxes are not paid by workers, but by the businesses.

State Sen. Bob Beers, R-Las Vegas, said the most important fact he secured from the study was that Nevada is one of six states which receives a majority of its tax revenue from people visiting the state.

If you count the taxes paid in the state by nonresidents, Nevada ranks 25th in terms of per capita taxes, he said.

"We are right in the middle," Beers said. "Government doesn’t really care if the taxes come from residents or visitors; a dollar is a dollar," he said.

Carole Vilardo, president of the Nevada Taxpayers Association, said she won’t buy the conclusion that Nevada is the second lowest taxed state until she reviews the study in detail.

But she did say Nevada is among the lower taxed states and that the Tax Foundation does qualify how it makes its calculations. The Nevada Taxpayers Association represents many different types of Nevada businesses.

Vilardo said economic development organizations can use the study results to sell the state to potential businesses.

"This is a tool that can be used to tout Nevada economically," Vilardo said. "It is particularly good for companies that might be looking at Nevada."

Ben Kieckhefer, a spokesman for Gov. Jim Gibbons, said the study results are positive for Nevada.

"It is our low tax burden that causes people to create business in this state and businesses to relocate in this state," he said. "It is something to be proud of."

He said it’s important for Nevada to have lower taxes than California since companies there are more likely to relocate to Nevada. Californians face a 10.5 percent state and local tax burden, the sixth highest in the nation.

Former Assemblywoman Sharron Angle, R-Reno, could not be reached for comment on the study.

Angle is pushing for voters to adopt a constitutional amendment along the lines of California’s Proposition 13 which would limit property tax increases to 2 percent a year.

According to Vilardo, whose organization opposes Angle’s initiative, Nevada ranks 36th among the states in property taxes.

A state law passed in 2005 limits property tax increases to 3 percent a year for resident-occupied homes, and 8 percent for commercial properties.

Angle, a state Senate candidate, has argued that legislators could increase property taxes at any time, while if voters approve her initiative, then it could not be changed from 2 percent without a subsequent vote of the people.

Her proposal, however, faces court challenges before it can win a spot on the November ballot.

Ahern said property taxes were included in the Tax Foundation calculations.

While Nevada legislators in 2003 increased taxes by a record $833 million, the Tax Foundation found it made only a slight difference in the percentage of taxes paid by Nevada residents.

Residents paid 7.2 percent of their income, or $1,625 in state and local taxes, in fiscal year 2003.

In fiscal year 2004, the period when higher taxes were implemented, they paid $1,860, or $235 more in state in local taxes.

But income rose dramatically during that period and the total tax burden rose to 7.3 percent.

The overall tax burden has declined each year in Nevada since 2004. The 6.6 percent current tax burden was tied for the lowest over the past 30 years.

Contact reporter Ed Vogel at evogel@reviewjournal.com or 775-687-3901.

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