Study: Nevada’s tax structure will hinder economic recovery
Nevada’s tax structure is an obstacle to economic recovery and shortfalls in the budget cannot be addressed with spending cuts alone, according to a study released on Jan. 5.
The report entitled “Structurally Unbalanced,” looks at budget problems in Nevada, California, Arizona and Colorado. It was released by Brookings Mountain West at the University of Nevada, Las Vegas, and the Morrison Institute of Public Policy at Arizona State University.
“Nevada relies heavily on sales tax and gaming revenue and has no personal and corporate income tax, so you have one of the most narrow state revenue systems found in the country,” wrote Matthew Murray, a professor of economics at the University of Tennessee and a lead researcher on the study. “With property and sales tax revenue suffering, it is not at all clear where Nevada will find the revenue to fund services, including those that support economic development moving forward.”
The report also said prohibitions in the state constitution against income taxes and mandates on how state funds are spent make it harder for the state to weather economic downturns.
“You need to reset the revenue system to generate revenue in ways not so susceptible to the nature of the economy you have,” Mark Muro, one of the study’s authors and a senior fellow and policy director at the Washington-based Brookings Institution, told the Las Vegas Review-Journal.
Nevada, according to the study, faces a budget shortfall of $2.5 billion to $3 billion going into the 2011 legislative session that begins Feb. 7. Newly elected Gov. Brian Sandoval, a Republican who ran on a no-new-tax stance, has said he will roll back spending to 2007 revenue levels and balance the budget without raising taxes or fees.
The study, however, concluded that “massive budget gaps cannot be responsibly closed by only cutting spending.”