Nevada tax system worst in U.S.

Cy Rya

Monday, Feb. 3, 2003 | 9:59 a.m.

CARSON CITY -- Nevada's tax system is "regressive and dysfunctional" and is ranked dead last among the states, a national magazine says.

Nevada hits its poorest citizens the hardest with taxes, says Governing, which issued its report today comparing the 50 states.

Gov. Kenny Guinn agrees with the report, says his press secretary, Greg Bortolin.

"It's the same point on which the budget has been built," Bortolin said. "The report underscores what he has been saying about the budget for six to eight months."

The state, according to the magazine, is last in the three categories of adequacy of revenue, fairness to taxpayers and management of the system.

Governing said, "Although Nevada has excellent opportunities to shift much of its tax burden to out-of-state tourists, it hasn't really taken advantage of this simple expedient."

The publication noted the 2001 Legislature created a tax study committee that recommended a business tax, an amusement tax and increases in liquor and cigarette levies.

"As soon as these recommendations were made, critics began gunning them down," said the magazine. "There is deeply rooted anti-tax ethos in the state, and whether these sensible suggestions will prevail in this year's legislative session is anybody's guess."

The report coincides with the opening of the Legislature. Guinn has suggested a $1.1 billion tax increase.

One of the shortcomings of the Nevada system is its tax collection system.

"Unlike other state revenue departments in which increased automation has helped cope with understaffing, Nevada has shortchanged its tax department in this area also," said the magazine.

Carole Vilardo, executive director of the Nevada Taxpayers Association, said in the magazine article, "We're not collecting revenue we're allowed to collect, because the computer software programs will not accommodate the changes that need to be made."

Guinn's budget recommends $12. 5 million next fiscal year and $20 million the following year to the state Department of Taxation to upgrade its system, mostly to collect the proposed 0.25 percent tax on gross receipts of business.

Bortolin said Guinn has served on a number of tax study committees that have made recommendations in the past to cure many of the problems.

State Budget Director Perry Comeaux said he agrees with many of the major findings. The report said the sales tax base is "narrowly drawn and riddled with exemptions, covering virtually no services in a state where the economy is almost entirely service-based."

Comeaux said the sales tax on products was a good idea in the 1960s and early 1970s. At that time, he said 70 percent of the economy was based on products and 30 percent on services. But that has reversed itself with services accounting for 60 percent and products for 40 percent.

The Las Vegas Chamber of Commerce has proposed the sales tax be extended to services. But that is not in Gov. Guinn's plan.

The state depended on gambling taxes but Comeaux said the growth will be slowed with the advent of Indian gambling in neighboring states. He said the governor's tax plan will "make real changes in the future" and at the same time produce some immediate revenue.