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Tax boost a drag to economy, study says
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REVIEW-JOURNAL CAPITAL BUREAU
Updated: Jul. 13, 2010 | 8:45 a.m.
CARSON CITY -- Nevada legislators could worsen an already disastrous economy by increasing taxes in 2011, a national tax research organization said in an analysis released today .
The Tax Foundation said legislators risk hurting the economy further if they decide to levy a corporate income tax or a gross receipts tax or expand the sales tax to services not now taxed.
Legislators and others have mentioned these taxes as those that might be considered at the next session.
Noting that California, Washington, Oregon and Arizona recently raised taxes, the Tax Foundation commented in its study: "Nevada's already enviable tax climate looks better and better. As the economy improves, the state is well-positioned for capital investment and job creation."
Created in 1937, the Tax Foundation has taken conservative stances on taxes and consistently ranked Nevada as one of the least taxed states in the nation. It ranked Nevada this year as having the fourth most favorable tax climate for business. In 2008, it found that the Silver State's residents have the second lowest state and local tax burden in the nation.
Joseph Henchman, tax counsel and director of state projects at the Tax Foundation, said Nevada needs to look at Maryland, where income taxes were increased for a short-term gain in revenue but now have led to a disincentive for the rich to invest.
"People are having trouble all over," Henchman said in a telephone interview. "You could make changes now to solve your short-term problem but undermine your ability to grow."
State Senate Majority Leader Steven Horsford, D-Las Vegas, declined immediate comment.
But he said in a previous interview that state revenue might fall more than $3 billion below what some consider must be spent when the Legislature convenes on Feb. 7.
Even Assembly Minority Leader Pete Goicoechea, R-Eureka, said recently that some tax increases might be necessary to balance the state budget.
Republican governor candidate Brian Sandoval thinks raising taxes is exactly the wrong thing to do, said campaign spokeswoman Mary-Sarah Kinner. Democratic candidate Rory Reid, who has said he intends to balance the budget without raising taxes, could not be reached for comment.
The Legislature paid Moody's Analytics $253,000 to study the state tax structure and review possible broad-based taxes on business.
Also, a 20-member citizens Vision Stakeholders Group was created by the Legislature to recommend changes, including taxes and other changes needed to improve the quality of life in Nevada over the next 20 years.
Horsford has vowed to try to implement recommendations from the tax study and the Stakeholders Group. The tax study's results, due July 1, have been delayed, and some observers contend they might not be released until after the November election.
In the analysis, Henchman said corporate income taxes are harmful to economic growth and are a volatile way to raise revenue. He said gross receipts taxes -- considered and rejected by Nevada legislators in 2003 -- are "destructive."
In 2005, Kentucky adopted a gross receipts tax and rejected it within a year.
"It's not based on profit, so each industry's profitability and costs are constantly weighed by politicians who decide on rates and exemptions and credits," Henchman said.
The same problem exists with expanding the sales taxes to include services that are not now taxed, Henchman said.
What happens is that lobbyists plead to legislators that their industry is vital and should not be taxed, he said.
"They tried that in Maryland in 2006," Henchman said. "It started out they were going to tax lawyers and medical services, tanning salons, car washes and everything. At the end of the day, the only one left was computer services."
Then, computer companies mounted a lobbying effort that led to the repeal of taxing their industry, he added.
"Times will get better," said Henchman, aware of Nevada's high unemployment rate and budget problems.
"Right now we are seeing a glimmer of a national economic recovery. State revenue increases will lag until people start investing and spending money. Nevada doesn't need to make it more unattractive to investors," he said.
Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.
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@steven.alexander and beachbum71-
Actually, gentlemen, according to the CNBC report, the costs of doing business (including tax burden and "fees" that are merely taxes by another name) ranks Nevada a dismal 37th among all states.
So much for that argument...
Business is bolting for the door precisely because of idiots like Horsford proclaiming that his goal is new business taxes to support the $300,000 a year salaries of his union paymasters. When Nevada was an attractive state to business, we did extremely well. It's just that every legislature since 2003 has made it a goal to see that Nevada is no longer attractive to business.
Gee buzz, we tried it the OTHER way. I mean, Nevada IS, and HAS BEEN one of the LOWEST TAXED STATES FOR BUSINESS IN THE COUNTRY SINCE IT WAS MADE A STATE AND WHERE HAS IT GOTTEN US? Oh, yeah, that's right; HERE! Lets keep doing it THAT way. Oh, and check out the recent rankings for best business environments; MASSACHUSETTS IS NUMBER 5. So much for the old "taxechusetts" theme eh? LOL
And CNBC revealed its 2010 list of the best states for business today. And Nevada was 47th. That's because they did more thorough research than the Tax Foundation. And there's more to being a good state for business than low taxes.
The only way this state will ever recover is if the government takes more of my money and gives it to civil servants so after "working" for a few years they can retire early with full benefits. The people who have no pension will just to get a second job to pay for these large payouts. As we all know government workers are the best and brightest among us and we should all make sacrifices so they won't have to.
I sure don't see a whole bunch of new business beating a path to Nevada right now do you?
So where is the money going to come from to keep the state running.
All the big companies pay taxes in other states but not here, a broad based business tax is the answer, we can't rely on the gamers to get us out of this mess.
Don't let the the Chamber of Commerce fool you, they want to blame everyone else but themselves. Time to pony up and support the economy of the State on Nevada.
Well Gentlemen! Aren't We full of ourselves! Yes by all means lower taxes again, there is still one state ranked HIGHER than we are in educational performance. Our founders had no problem with taxes, that's what is used to fund the operation of our government. Do yo realize that tariffs on imports used the fund the lions share of governmental operation? of course taxes, I mean tariffs were about 20% at the time. Now tariffs on imported good are less than 2%. Why are you so against having those who benefit most from using the commons from paying the most? Cutting taxes doesn't create jobs or opportunity for our citizens. It forces our government to find other means to support itself, usually by shifting the tax burden to those who can least afford it, we the people.
Exceedingly well put, Mr. Adams. As much as I, a lifelong registered Independent, hope for quality reporting from the RJ, it still baffles me why the reporters (from the cubs to the Papa Bears) can't seem to find their way to full disclosure.
I find it extremely troubling that the RJ within the first 4 paragraphs will identify the Tax Foundation as a "conservative" group. Yet when the RJ runs stories on "studies" by groups advocating for a state income tax will not identify the leanings of the group in question. RJ, why is it that you will not cite the leanings of groups that favor a state income tax?
Is it because when one goes to their websites it is easy to discover that they have ties to socialist groups? It takes but a few minutes, do your job!
Oh, sure. That is why all the most innovative thinking outside of the gaming industry is putting its money and talent into Nevada. Hahahahahaha! The "attractive" tax structure has dropped you firmly into the bottom 10% of states perennially in terms of health, education and quality of life.
With the Bush tax cuts still on the books, jobs are flooding into the Silver State...NOT!
This "analysis" is just another salvo by the anti-tax zealots, that's all. Once again, the Something For Nothing crowd is having an amen orgy!