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Nevada’sSalesTaxa reviewandanalysis
Nevada’sSalesTaxa reviewandanalysis
Fact:Nevada’sSalesTaxWasDesignedinMid‐1950’s,aTimeWhen
Nevada’sEconomyLookedVeryDifferentthanitDoesToday
Nevada’sSalesTaxa reviewandanalysis
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BriefHistoryoftheNevadaSalesTax
1955Statesalestaxestablishedat2percent
1967Localschoolsupporttaxestablishedat1percent
1969Basiccity‐countyrelieftaxestablishedat0.5percent
1979
Salestaxonfoodeliminated
1981Localschoolsupporttaxincreasedto1.5percent;Supplementalcity‐countyrelieftaxestablishedat1.75percent
1997Countiesauthorizedtoimpose0.25percentsalestaxforinfrastructure
2009Combinedratereachesashighas8.1percent
inClarkCounty
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxationandNevadaTaxpayersAssociation.
Nevada’sSalesTaxa reviewandanalysis
Nevada’sSalesTaxa reviewandanalysis
1960 State Population: 280,000
Statewide Employment: 100,800
State Government Employment: 3,200
State Spending: $60 million, $25 million in the General Fund
Sales and Use Tax and Gaming taxes account for 75% of General Fund revenues
State is running a surplus
Education accounts for 68% of General Fund spending
Nevada still using cash basis accounting
Great Depression and WWII economic cycles remain considerations
Dwight Eisenhower is president of the US
Cassius Clay (who later took the name Muhammad Ali) wins his first professional fight
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Nevada’sSalesTaxa reviewandanalysis
NevadaSalesTaxRateHighestCombined Rate,1960vs.2013
2.0%
8.1%
1960 2013Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
Nevada’sSalesTaxa reviewandanalysis
StateSalesTax(GeneralFund)
RetailSalesTaxAllocation(ofcombined8.10%ClarkCountyrate)
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
2.0%
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Nevada’sSalesTaxa reviewandanalysis
CombinedLocalSchoolSupportTax
RetailSalesTaxAllocation(ofcombined8.10%ClarkCountyrate)
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
StateSalesTax(GeneralFund) 2.0%
2.6%
Nevada’sSalesTaxa reviewandanalysis
CombinedLocalSchoolSupportTax
RetailSalesTaxAllocation(ofcombined8.10%ClarkCountyrate)
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
StateSalesTax(GeneralFund)
4.6%
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Nevada’sSalesTaxa reviewandanalysis
BasicCity‐CountyReliefTax
SupplementalCity‐CountyReliefTax
RetailSalesTaxAllocation(ofcombined8.10%ClarkCountyrate)
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
CombinedLocalSchoolSupportTax
StateSalesTax(GeneralFund)
4.6%
2.25%
Nevada’sSalesTaxa reviewandanalysis
TransportationOptionTax
FloodControlOptionTax
PoliceOptionTax
WaterInfrastructureOptionTax
RetailSalesTaxAllocation(ofcombined8.10%ClarkCountyrate)
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
BasicCity‐CountyReliefTax
SupplementalCity‐CountyReliefTax
CombinedLocalSchoolSupportTax
StateSalesTax(GeneralFund)
4.6%
2.25%
1.25%
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Nevada’sSalesTaxa reviewandanalysis
RetailSalesTaxAllocation(ofcombined8.10%ClarkCountyrate)
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
8.1%
TransportationOptionTax
FloodControlOptionTax
PoliceOptionTax
WaterInfrastructureOptionTax
BasicCity‐CountyReliefTax
SupplementalCity‐CountyReliefTax
CombinedLocalSchoolSupportTax
StateSalesTax(GeneralFund)
Nevada’sSalesTaxa reviewandanalysis
Fact:Nevada’sStateandLocalGovernmentsRemainVery
DependentonSalesTaxCollections
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ComparativeStateandLocalTaxRevenueDistribution
Nevadavs.U.S.Averages2010
RevenueSource NevadaU.S.
AverageHigher/Lower
Property 24.0% 23.5% SlightlyHigher
Generalsales 19.5% 15.2% SignificantlyHigher
Motorfuel 2.5% 2.0% SlightlyHigher
Alcoholicbeverage 0.3% 0.3% Same
Tobaccoproducts 0.8% 0.9% AbouttheSame
Publicutilities 1.9% 1.5% SlightlyHigher
Otherselectivesales 10.2% 3.0% SignificantlyHigher
Individualincome 0.0% 13.9% SignificantlyLower
Corporateincome 0.0% 2.3% SignificantlyLower
Motorvehiclelicense 1.1% 1.2% AbouttheSame
Othertaxes 9.3% 3.8% SignificantlyHigher
Source:U.S.CensusofGovernments.
Nevada’sSalesTaxa reviewandanalysis
Nevada’sSalesTaxa reviewandanalysis
SalesTax85.9%
CigaretteTax1.1%
LiquorTax0.3%
RealProperty
TransferTax1.9%
Gov'tServicesTax
10.8%
NevadaConsolidatedTaxDistributionFiscal Year2011‐2012
Source:NevadaDepartmentofTaxation,ConsolidatedTaxDistribution2012.
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Nevada’sSalesTaxa reviewandanalysis
SalesTax85.9%
CigaretteTax1.1%
LiquorTax0.3%
RealProperty
TransferTax1.9%
Gov'tServicesTax
10.8%
NevadaConsolidatedTaxDistributionFiscal Year2011‐2012
Source:NevadaDepartmentofTaxation,ConsolidatedTaxDistribution2012.
Nevada’sSalesTaxa reviewandanalysis
SalesandUseTax36%
GamingTax27%
MBT11%
AllOtherGeneralFundTaxRevenues
26%
NevadaStateGeneralFundTaxRevenuesFiscalYears2013‐2015
Source:EconomicForumGeneralFundRevenuesForecast2013‐2015.
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Nevada’sSalesTaxa reviewandanalysis
SalesandUseTax36%
GamingTax27%
MBT11%
AllOtherGeneralFundTaxRevenues
26%
NevadaStateGeneralFundTaxRevenuesFiscalYears2013‐2015
Source:EconomicForumGeneralFundRevenuesForecast2013‐2015.
Nevada’sSalesTaxa reviewandanalysis
Fact:Nevada’sSalesTaxBaseisLikelytoErodeOverTime
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Nevada’sSalesTaxa reviewandanalysis
NevadaTaxableRetailSalesFY1982– FY2012
$7 $7 $7 $8 $9 $10$11 $12 $14
$14
$15$16 $18 $20 $22 $25
$26 $28 $30 $32
$32 $34$39$44$49
$49
$48
$42
$38 $40 $43
$0
$10
$20
$30
$40
$50
$60
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Billions
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
Nevada’sSalesTaxa reviewandanalysis
NevadaTaxableRetailSalesFY1982– FY2012
$7 $7 $7 $8 $9 $10$11 $12 $14
$14
$15$16 $18 $20 $22 $25
$26 $28 $30 $32
$32 $34$39$44$49
$49
$48
$42
$38 $40 $43
$0
$10
$20
$30
$40
$50
$60
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Billions
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
Taxableretailsalesdeclinedby13percentbetweenFY2007andFY2012
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Nevada’sSalesTaxa reviewandanalysis
NevadaTaxableRetailSalesInflationAdjustedFY1982– FY2012(2000=100)
$13
$12
$13
$13
$14$15$16 $18 $19
$19
$18
$19 $21
$22 $24 $26
$27 $29$30
$31
$30$32 $3
5$40 $43
$42
$40
$35
$31 $32 $34
$0
$10
$20
$30
$40
$50
$60
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Billions
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
Nevada’sSalesTaxa reviewandanalysis
NevadaTaxableRetailSalesInflationAdjustedFY1982– FY2012(2000=100)
$13
$12
$13
$13
$14$15$16 $18 $19
$19
$18
$19 $21
$22 $24 $26
$27 $29$30
$31
$30$32 $3
5$40 $43
$42
$40
$35
$31 $32 $34
$0
$10
$20
$30
$40
$50
$60
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Billions
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
Inflationadjustedtaxableretailsalesdeclinedby21percent
betweenFY2006andFY2012
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Nevada’sSalesTaxa reviewandanalysis
NevadaTaxableRetailSalesInflationAdjustedperCapitaFY1982– FY2012
(2000=100)
$14,486
$13,691
$13,783
$14,184
$13,889
$14,481
$14,820
$15,169
$15,633
$14,106
$13,079
$13,173
$13,757
$13,698
$14,416
$14,630
$14,255
$14,785
$14,821
$14,729
$14,004
$14,089
$15,167
$16,468
$17,099
$16,440
$15,324
$12,939
$11,335
$11,791
$12,289
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
Nevada’sSalesTaxa reviewandanalysis
NevadaTaxableRetailSalesInflationAdjustedperCapitaFY1982– FY2012
(2000=100)
$14,486
$13,691
$13,783
$14,184
$13,889
$14,481
$14,820
$15,169
$15,633
$14,106
$13,079
$13,173
$13,757
$13,698
$14,416
$14,630
$14,255
$14,785
$14,821
$14,729
$14,004
$14,089
$15,167
$16,468
$17,099
$16,440
$15,324
$12,939
$11,335
$11,791
$12,289
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
SinceFY1982,Nevadahasgeneratedanaverageof$14,300perpersonannuallyintaxableretailsales
Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
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Nevada’sSalesTaxa reviewandanalysis
NevadaTaxableRetailSalesInflationAdjustedperCapitaFY1982– FY2012
(2000=100)
$14,486
$13,691
$13,783
$14,184
$13,889
$14,481
$14,820
$15,169
$15,633
$14,106
$13,079
$13,173
$13,757
$13,698
$14,416
$14,630
$14,255
$14,785
$14,821
$14,729
$14,004
$14,089
$15,167
$16,468
$17,099
$16,440
$15,324
$12,939
$11,335
$11,791
$12,289
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.
Percapitaexpendituresdeclinedby28percentbetweenFY2006andFY2012
Nevada’sSalesTaxa reviewandanalysis
Why?
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Nevada’sSalesTaxa reviewandanalysis
1.WeSpendOurMoneyDifferently
Nevada’sSalesTaxa reviewandanalysis
PersonalConsumptionExpendituresbyMajorTypeofProduct,Q11947– Q42012
61.2%
34.2%
20%
30%
40%
50%
60%
70%
1947 1956 1965 1974 1983 1992 2001 2010
Goods
Source:AppliedAnalysis,basedondatareportedbytheUnitedStateBureauofEconomicAnalysis.
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Nevada’sSalesTaxa reviewandanalysis
PersonalConsumptionExpendituresbyMajorTypeofProduct,Q11947– Q42012
61.2%
34.2%38.8%
65.8%
20%
30%
40%
50%
60%
70%
1947 1956 1965 1974 1983 1992 2001 2010
Services
Goods
Source:AppliedAnalysis,basedondatareportedbytheUnitedStateBureauofEconomicAnalysis.
Nevada’sSalesTaxa reviewandanalysis
1.WeSpendOurMoneyDifferently
2.TheInternetisCapturingaGreaterShareofTotalRetailSales
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Nevada’sSalesTaxa reviewandanalysis
GrowthinInternet‐BasedSalesintheU.S.AnnualGrowth Rates(NotSeasonallyAdjusted)
Source:AppliedAnalysis,basedondatareportedbytheU.S.CensusBureau.
‐35%
‐25%
‐15%
‐5%
5%
15%
25%
35%
2002 2005 2008 2011
TotalRetailSales
‐35%
‐25%
‐15%
‐5%
5%
15%
25%
35%
2002 2005 2008 2011
“E‐Commerce”Sales
Nevada’sSalesTaxa reviewandanalysis
1.WeSpendOurMoneyDifferently
2.TheInternetisCapturingaGreaterShareofTotalRetailSales
3.Nevada’sEconomyisDiversifyingAwayFromTourism
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Nevada’sSalesTaxa reviewandanalysis
24.5
23.1
22.5
22.0
21.9
21.4
21.8
21.2
19.7
18.5
18.5
18.9
19.0
10
12
14
16
18
20
22
24
26
2000 2002 2004 2006 2008 2010 2012Source:AppliedAnalysis,basedondatareportedbytheNevadaCommissiononTourism
NevadaVisitorsperCapitaAnnualSeries
Nevada’sSalesTaxa reviewandanalysis
5.2 5.4 5.5 5.6 5.6 6.9 7.79.9
19.8
25.4
VisitorsperCapitaTop10U.S. VisitorDestinationswithPopulationOver1Million
Source:AppliedAnalysis,basedondatareportedbytheU.S.CensusBureauandvarioustourismboards(dataasof2011).
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Nevada’sSalesTaxa reviewandanalysis
1.WeSpendOurMoneyDifferently
2.TheInternetisCapturingaGreaterShareofTotalRetailSales
3.Nevada’sEconomyisDiversifyingAwayFromTourism
4.LessConstructionActivity
Nevada’sSalesTaxa reviewandanalysis
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
1992 1997 2002 2007 2012Source:AppliedAnalysis,basedondatafromtheNevadaDepartmentofTrainingandRehabilitation
NevadaConstructionEmployment
asaPercentageofTotalEmployment(1992‐2012)
0
500
1,000
1,500
2,000
1992 1997 2002 2007 2012
Commercial
North South
NevadaAnnualUnitsPermitted
010,00020,00030,00040,00050,000
1992 1997 2002 2007 2012
Residential
North South
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Nevada’sSalesTaxa reviewandanalysis
Fact:NevadaHasaComparablyNarrowSalesTaxBase
Nevada’sSalesTaxa reviewandanalysis
0
20
40
60
80
100
120
140
160
180
Source:AppliedAnalysis,basedondatareportedbytheFederationofTaxAdministrators(March2010,latestavailable).
NumberofServicesTaxedbyState
Nevada
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Nevada’sSalesTaxa reviewandanalysis
Fact:
NevadaHasaComparablyHighSalesTaxRate
Nevada’sSalesTaxa reviewandanalysis
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Avg.CombinedSalesTaxRatesbyStateAsofJanuary 1,2013
Source:TaxFoundation.
Nevada
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Nevada’sSalesTaxa reviewandanalysis
WesternRegion–Avg.CombinedSalesTaxRatesAsofJanuary1,2013
Source:TaxFoundation.
8.4%
8.9%
5.3%
0.0%6.0%
7.9% 6.7%
0.0%
9.2%
7.4%
7.3%
1.7%4.4%
Nevada’sSalesTaxa reviewandanalysis
NevadaSales&UseTaxRates
byCounty
6.850%
6.850%7.725%
7.1%
7.6%7.1%
6.850%
7.725%
7.1%
8.1%
7.1%
6.850%
6.850%
7.6%
7.475%
7.1%
7.1%
Source:NevadaDepartmentofTaxation.
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Nevada’sSalesTaxa reviewandanalysis
SoWhatisTheAlternative?
Nevada’sSalesTaxa reviewandanalysis
ZubrowReport,1960
LybrandReport,1966
PriceWaterhouseULI,1988
LegislativeCommission,1990
Governor’sTaskForce,2002
ChallengeswiththeState’s
revenuesystemhavebeenwelldocumented
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Nevada’sSalesTaxa reviewandanalysis
Equity
Ease of Compliance
Flexibility
Inte
gra
tion
PoliticalViability
Simplicity
Nevada’sSalesTaxa reviewandanalysis
PartIExpandingtheTaxBaseby
CreatingaNevadaServicesTax
PartIILowerNevada’sExistingStateandLocalSalesTax
Rate(s)
TaxNeutralReformStrategy
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Nevada’sSalesTaxa reviewandanalysis
Nevada’sCurrentTaxBaseisApproximately$40BillionMajorSources(1) AutoSales(2) EatingandDrinking(3) GeneralMerchandise
Nevada’sSalesTaxa reviewandanalysis
ItemsNotCurrentlySubjecttoNevada’sSalesandUseTaxTotalApproximately$87Billion
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Nevada’sSalesTaxa reviewandanalysis
Most Common Services Subject to Sales Tax in Other States But Exempt in Nevada
23232324242426262627272829293132
364344
0 25 50
Diaperservice
Commercialartandgraphicdesign.
Membershipfeesinprivateclubs.
Software‐customprograms‐material
DirectSatelliteTV
Repairlabor,electronicsandgenerally
CableTVservices
Customprocessing(oncustomer'sproperty)
Taxidermy
Billiardparlors
Bowlingalleys
Tirerecappingandrepairing
900Numberservices
Software‐DownloadedorModifications
Weldinglabor(fabricationandrepair)
Commerciallinensupply
Electricity
Intrastatetelephone&telegraph
Cellulartelephoneservices
NumberofStatesWhereServiceisTaxed
Source:AppliedAnalysis,basedondatareportedbytheFederationofTaxAdministrators(March2010,latestavailable).
Nevada’sSalesTaxa reviewandanalysis
Tier1:Services($17B)(1) ServicestoBuildings(2) RepairandMaintenance(3) DiscretionaryServices
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Nevada’sSalesTaxa reviewandanalysis
Tier2:Services($40B)(1) PersonalServices(2) ConstructionandDevelopmentServices(3) CommercialLeasing(4) ProfessionalandFinancialServices
Nevada’sSalesTaxa reviewandanalysis
Tier3:Services($30B)(1) EducationServices(2) HealthCareServices(3) ChildCareServices(4) HomeLeasing(Rent)
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Nevada’sSalesTaxa reviewandanalysis
ReformWillRequireTimeandPreparation
Nevada’sSalesTaxa reviewandanalysis
AreasofConcern1.Distributionofincrementalrevenues
2.Determiningwhatserviceswillbeachallengepolitically
3.Somewillwanttousethestrategytogenerateadditionalresourcesforprograms
4.Requiresatwo‐thirdsvote,evenifitistaxneutral
5.Shouldbeconsideredaspartofabroaderrevenuereformagenda
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Nevada’sSalesTaxa reviewandanalysis
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