Nevadans: Hold on to Your Wallets
Two recent studies signal upcoming discussion (in legislative circles) of the inevitable: Nevadans are going to be paying more taxes, and likely sooner rather than later.
Brookings Mountain West/Morrison Institute recently examined the fiscal fiasco currently prevailing in Nevada, and a few other western states. The conclusion? “Structurally Unbalanced,” which could be construed as a euphemism for “spending exceeds tax collections by just too darned much.”
Noting that the budget gap in Nevada for the next couple of years will likely range from between $1 and $3 billion, the study observes, “Nevada, for example, has one of the least diversified tax systems in the country, and relies disproportionately on sales and gaming revenue. Consideration could be given there to variants of the new business activity taxes, like the commercial activities tax in Ohio or the ‘margins’ tax in Texas, since these gross receipts taxes may not run afoul of the state’s constitution.”
And from the Center for Regional Studies College of Business University of Nevada, Reno, we hear that, “Nevada’s revenues are primarily derived from three sources: 1) property taxes, 2) sales and use taxes and 3) gaming taxes. When Nevada became a state, property taxes (including the net proceeds tax – mining’s version of property tax) were the primary source of state and local revenues. Real estate comprised the vast majority of all property values. Since then other forms of property have increased tremendously in value but property taxes are levied on only a portion of the value of real estate. When the sales and use tax was instituted in Nevada in 1956, physical goods comprised the majority of sales in the economy. Now services and intangible property comprise the majority of sales, so the base for sales and use tax has become much narrower relative to the overall economy.”
So, get ready to start hearing more and more, in the coming days of, among other things, expanding the sales tax base to include services, and figuiring out a new way to determine the value of “property,” including the possibility of expansion of that tax base to include the intangible value of your business. Lest “failure to transform the Nevada’s fiscal system may contribute to a period of economic malaise extending far beyond the current recession.”
None of which problems seems to be holding back the politicians in Illinois who, we hear, have agreed to a 75% increase in the income tax right now! Seems Governor Pat Quinn (no relation, thankfully) and the leaders of both legislative houses agree that a pending bill, if passed would raise the personal income tax rate from the current 3% to 5.25%!
But not to worry – this one would be another of those “temporary” measures, lasting a mere four years, after which the rate would drop to 3.75%
And we bet that you haven’t heard this one before, as noted by CBS: “Democrats say they have no choice but to raise taxes as one part of a solution to Illinois’ massive budget crisis.”
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He is also a contributor to the recently published 14th edition of Tax Savvy for Small Business, published by Nolo. He can be reached at 831-7288, and welcomes comments below or at firstname.lastname@example.org.