nevada’s sales tax - nevada legislature 6. nevada’s sales tax. areview and analysis. retail...

4/18/2013

1

Nevada’sSalesTaxa reviewandanalysis


Fact:Nevada’sSalesTaxWasDesignedinMid‐1950’s,aTimeWhen

Nevada’sEconomyLookedVeryDifferentthanitDoesToday


Janet.Meredith

Text Box

EXHIBIT G Senate Committee on Legislative Operations and Elections Date: 4-18-2013 Page: 1 of 28

4/18/2013

2

BriefHistoryoftheNevadaSalesTax

1955Statesalestaxestablishedat2percent

1967Localschoolsupporttaxestablishedat1percent

1969Basiccity‐countyrelieftaxestablishedat0.5percent

1979

Salestaxonfoodeliminated

1981Localschoolsupporttaxincreasedto1.5percent;Supplementalcity‐countyrelieftaxestablishedat1.75percent

1997Countiesauthorizedtoimpose0.25percentsalestaxforinfrastructure

2009Combinedratereachesashighas8.1percent

inClarkCounty

Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxationandNevadaTaxpayersAssociation.



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

G 2

4/18/2013

3


NevadaSalesTaxRateHighestCombined Rate,1960vs.2013

2.0%

8.1%

1960 2013Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.


StateSalesTax(GeneralFund)

RetailSalesTaxAllocation(ofcombined8.10%ClarkCountyrate)

Source:AppliedAnalysis,basedondatareportedbytheNevadaDepartmentofTaxation.

2.0%

G 3

4/18/2013

4


CombinedLocalSchoolSupportTax



StateSalesTax(GeneralFund) 2.0%

2.6%






4.6%

G 4

4/18/2013

5


BasicCity‐CountyReliefTax

SupplementalCity‐CountyReliefTax





4.6%

2.25%


TransportationOptionTax

FloodControlOptionTax

PoliceOptionTax

WaterInfrastructureOptionTax







4.6%

2.25%

1.25%

G 5

4/18/2013

6




8.1%

TransportationOptionTax

FloodControlOptionTax

PoliceOptionTax

WaterInfrastructureOptionTax






Fact:Nevada’sStateandLocalGovernmentsRemainVery

DependentonSalesTaxCollections

G 6

4/18/2013

7

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.



SalesTax85.9%

CigaretteTax1.1%

LiquorTax0.3%

RealProperty

TransferTax1.9%

Gov'tServicesTax

10.8%

NevadaConsolidatedTaxDistributionFiscal Year2011‐2012

Source:NevadaDepartmentofTaxation,ConsolidatedTaxDistribution2012.

G 7

4/18/2013

8


SalesTax85.9%

CigaretteTax1.1%

LiquorTax0.3%

RealProperty

TransferTax1.9%

Gov'tServicesTax

10.8%

NevadaConsolidatedTaxDistributionFiscal Year2011‐2012

Source:NevadaDepartmentofTaxation,ConsolidatedTaxDistribution2012.


SalesandUseTax36%

GamingTax27%

MBT11%

AllOtherGeneralFundTaxRevenues

26%

NevadaStateGeneralFundTaxRevenuesFiscalYears2013‐2015

Source:EconomicForumGeneralFundRevenuesForecast2013‐2015.

G 8

4/18/2013

9


SalesandUseTax36%

GamingTax27%

MBT11%

AllOtherGeneralFundTaxRevenues

26%

NevadaStateGeneralFundTaxRevenuesFiscalYears2013‐2015

Source:EconomicForumGeneralFundRevenuesForecast2013‐2015.


Fact:Nevada’sSalesTaxBaseisLikelytoErodeOverTime

G 9

4/18/2013

10


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



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


Taxableretailsalesdeclinedby13percentbetweenFY2007andFY2012

G 10

4/18/2013

11


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



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


Inflationadjustedtaxableretailsalesdeclinedby21percent

betweenFY2006andFY2012

G 11

4/18/2013

12


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.



(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


G 12

4/18/2013

13



(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


Why?

G 13

4/18/2013

14


1.WeSpendOurMoneyDifferently


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.

G 14

4/18/2013

15


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.



2.TheInternetisCapturingaGreaterShareofTotalRetailSales

G 15

4/18/2013

16


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




3.Nevada’sEconomyisDiversifyingAwayFromTourism

G 16

4/18/2013

17


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


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).

G 17

4/18/2013

18




3.Nevada’sEconomyisDiversifyingAwayFromTourism

4.LessConstructionActivity


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

G 18

4/18/2013

19


Fact:NevadaHasaComparablyNarrowSalesTaxBase


0

20

40

60

80

100

120

140

160

180

Source:AppliedAnalysis,basedondatareportedbytheFederationofTaxAdministrators(March2010,latestavailable).

NumberofServicesTaxedbyState

Nevada

G 19

4/18/2013

20


Fact:

NevadaHasaComparablyHighSalesTaxRate


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Avg.CombinedSalesTaxRatesbyStateAsofJanuary 1,2013

Source:TaxFoundation.

Nevada

G 20

4/18/2013

21


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%


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.

G 21

4/18/2013

22


SoWhatisTheAlternative?


ZubrowReport,1960

LybrandReport,1966

PriceWaterhouseULI,1988

LegislativeCommission,1990

Governor’sTaskForce,2002

ChallengeswiththeState’s

revenuesystemhavebeenwelldocumented

G 22

4/18/2013

23


Equity

Ease of Compliance

Flexibility

Inte

gra

tion

PoliticalViability

Simplicity


PartIExpandingtheTaxBaseby

CreatingaNevadaServicesTax

PartIILowerNevada’sExistingStateandLocalSalesTax

Rate(s)

TaxNeutralReformStrategy

G 23

4/18/2013

24


Nevada’sCurrentTaxBaseisApproximately$40BillionMajorSources(1) AutoSales(2) EatingandDrinking(3) GeneralMerchandise


ItemsNotCurrentlySubjecttoNevada’sSalesandUseTaxTotalApproximately$87Billion

G 24

4/18/2013

25


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).


Tier1:Services($17B)(1) ServicestoBuildings(2) RepairandMaintenance(3) DiscretionaryServices

G 25

4/18/2013

26


Tier2:Services($40B)(1) PersonalServices(2) ConstructionandDevelopmentServices(3) CommercialLeasing(4) ProfessionalandFinancialServices


Tier3:Services($30B)(1) EducationServices(2) HealthCareServices(3) ChildCareServices(4) HomeLeasing(Rent)

G 26

4/18/2013

27


ReformWillRequireTimeandPreparation


AreasofConcern1.Distributionofincrementalrevenues

2.Determiningwhatserviceswillbeachallengepolitically

3.Somewillwanttousethestrategytogenerateadditionalresourcesforprograms

4.Requiresatwo‐thirdsvote,evenifitistaxneutral

5.Shouldbeconsideredaspartofabroaderrevenuereformagenda

G 27

4/18/2013

28


G 28

nevada’s sales tax - nevada legislature 6. nevada’s sales tax. areview and analysis. retail...

Documents