Posts Tagged ‘tax foundation’

Nevadans Will Pay Nearly 5 Percent More If Tax Breaks Expire

By Nevada News Bureau Staff | 11:12 am November 26th, 2012

CARSON CITY – A Nevada family of four with a median income of $65,212 will see a nearly 5 percent tax hike next year if a collection of tax breaks are not renewed by Congress as it deals with the so-called “fiscal cliff”, according to a new report by the Tax Foundation.

The 4.92 percent tax increase as a percentage of the median income ranks Nevada 29th among the states in the higher rates they would pay, the study determined.

The biggest increase if the Bush-era and President Obama tax cuts disappear in 2013 would be the 6.82 percent rate paid in New Jersey. The lowest would be the 4.12 percent rate in Washington state.

The total tax increase in Nevada would be $3,211 from 2011 to 2013, with $1,000 coming from the Child Tax Credit, $907 from other Bush era tax cuts, and $1,304 from an increase in the payroll tax, according to the Tax Foundation’s tax policy calculator.

In an analysis of the fiscal cliff released earlier this month, the Tax Foundation notes that on Jan. 1, 2013, five taxes enacted as part of the Patient Protection and Affordable Care Act (PPACA) – also called Obamacare – will take effect as well, along with sequester spending reductions of $109 billion due to the failure of the “supercommittee” to reach consensus on budget reductions.

“Taken together this fiscal cliff could potentially reduce economic output by hundreds of billions of dollars,” the foundation reports.

Various estimates have but the effects of the fiscal cliff on the economy at 4 percent or more of the gross domestic product in 2013.

The Tax Foundation is a non-profit, non-partisan tax research organization based in Washington, D.C.

Nevada Ranks 3rd Among States For Best Tax Climate For Business

By Sean Whaley | 9:39 am October 9th, 2012

CARSON CITY – Nevada is one of the 10 best states for its business tax climate, while companies in states like New York, New Jersey, and California have a far less pleasant environment to deal with, according to a new report by the Tax Foundation.

“Even in our global economy, a state’s strongest and most immediate competition often comes from other states,” said Tax Foundation economist Scott Drenkard. “State lawmakers need to be aware of how their states’ business climates match up to their immediate neighbors and to other states in their region.”

Nevada ranked 3rd in the Tax Foundation report released today, unchanged from last year. Nevada scored less well in two of the five categories that make up the ranking, coming in 42nd for its sales tax index rate, which is considered high at a statewide 6.85 percent rate; and 41st for its unemployment insurance tax, which does not provide for many benefit exclusions like many states do.

Courtesy of the Tax Foundation.

The survey is a snapshot in time as of July 1, 2012, and so does not include any evaluation of a Texas-style margins tax being proposed by Nevada by the Nevada State Education Association. The association is now collecting signatures to take the measure to the Legislature in 2013, but it still faces a court challenge.

In a press briefing today to announce the results of the new edition, speakers make it clear that Nevada’s high score would be substantially worse with a margins, or gross receipts, tax.

Texas scored in the top 10 in the survey in spite of the margins tax, not because of it, Drenkard said.

“We penalize states heavily for having gross receipts taxes because they are very distortionary,” he said. “It’s similar to having a very poorly structured sales tax.”

The top ten states in the 2013 Index are Wyoming (#1), South Dakota (#2), Nevada (#3), Alaska (#4), Florida (#5), Washington (#6), New Hampshire (#7), Montana (#8), Texas (#9), and Utah (#10).

Many of the top ranking states do not have one or more of the major statewide taxes, such as a personal or corporate income tax or a sales tax. Wyoming, South Dakota and Nevada, for example, have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.

The 10 lowest ranked states in the 2013 Index are Maryland (#41), Iowa (#42), Wisconsin (#43), North Carolina (#44), Minnesota (#45), Rhode Island (#46), Vermont (#47), California (#48), New Jersey (#49), and New York (#50).

The State Business Tax Climate Index, now in its 9th edition, collects data on over a hundred tax provisions for each state and synthesizes them into a single score. The states are then compared against each other, so that each state’s ranking is relative to actual policies in place in other states around the country. A state’s ranking can rise or fall significantly based not just on its own actions, but on the changes or reforms made by other states.

The index enables business leaders, government policymakers, and taxpayers to make an apples-to-apples comparison of their state’s tax system. While some similar studies focus on the total amount residents pay in taxes each year, the index focuses on whether the state’s tax code itself enhances or harms the competitiveness of its business environment.

Despite moderate corporate taxes, New York scores at the bottom this year by having the worst individual income tax, the sixth-worst unemployment insurance taxes, and the sixth-worst property taxes. The states in the bottom 10 suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.

Maine saw the greatest improvement this year, vaulting them from 37th to 30th best overall, in part due to a repeal of their alternative minimum tax. Michigan also made a sizable leap of six places by replacing their cumbersome and distortionary gross receipts tax (the Michigan Business Tax) with a flat 6 percent corporate income tax. This improved their overall rank from 18th to 12th best, and their corporate sub-rank from 49th to 7th best.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937.


Audio clip:

Tax Foundation economist Scott Drenkard says a margins tax in Nevada would worsen the state’s Top 10 ranking:

100912Drenkard :26 of Nevada substantially.”:



New Study Finds Low Tax Burden For Mature Nevada Businesses But Higher Costs For New Firms

By Sean Whaley | 12:11 pm February 29th, 2012

CARSON CITY – Nevada ranks at the top of states for its low overall tax liability paid by mature businesses, but only 38th for new firms due in part to a lack of incentives, according to a new comprehensive study by the Tax Foundation.

The first of its kind 50-state apples-to-apples analysis, released today in a report called “Location Matters,” a comparative analysis of state tax costs on business, could provide guidance to Gov. Brian Sandoval and lawmakers as they seek to diversify Nevada’s economy and grow jobs.

The study looked at Las Vegas and Reno.

Tax Foundation report, "Location Matters."

Nevada continues to lead the nation in unemployment.

The low ranking for Nevada for new firms is due in part to the lack of tax incentives provided to companies seeking to locate here. And despite the lack of a corporate income tax, other taxes and high unemployment insurance rates also contributed to the low ranking, said foundation President Scott Hodge in a telephone conference call announcing the results.

“Not having a corporate income tax is an incentive in and of itself, so that certainly, I think, is one of the most attractive features for Nevada and of course the other states that don’t have a corporate income tax,” he said.

Hodge said he hopes the study, “provides a real guide for legislators, and governors and other state officials, in reviewing their state in looking to find out how they can make it the most competitive possible and really encouraging tax competition across the states. And out of that we hope that better tax policy comes of it.”

The study compared seven types of firms across the states: a corporate headquarters, a research and development firm, retail store, call center, distribution center, capital-intensive manufacturing and labor-intensive manufacturing. It also compared the states based on mature firms and new firms.

Scott Hodge, president of the Tax Foundation.

Some of the highlights for Nevada include:

- Nevada ranks third for the mature retail operation, with a total tax burden nearly 40 percent below the national average. Nevada’s lack of a corporate income tax and low property tax burden are the key factors in this top ranking. However, the state does have the sixth-highest unemployment insurance (UI) tax burden for this firm type.

- The same factors of no income taxes and low property taxes are also key in the state’s fourth place ranking for mature distribution centers and eighth-place rank for corporate headquarters. Once again, these operations are also burdened with very high UI taxes.

- Nevada ranks 11th for both mature capital-intensive and labor-intensive manufacturing. However, the state would have ranked higher for these operations if not for the fact that its high sales tax rate applies to manufacturing equipment.

- The state ranks 46th for new capital-intensive manufacturing with a tax burden 92 percent above the national average. Even without the incentives that most states provide new firms, this operation has a low income tax burden. However, this firm is burdened by some of the highest UI taxes, sales taxes and property taxes, especially the property tax on equipment.

The study found that for new firms, Nebraska and Louisiana ranked first for several of the new business categories.

Ray Bacon, executive director of the Nevada Manufacturers Association, said he generally agrees with the information about Nevada contained in the report.

“The UI (unemployment insurance) might be a little off, but it won’t be as our rates will increase and will stay high for years,” he said.

Nevada has borrowed more than $700 million from the federal government to pay jobless claims during the current economic slowdown.

Implementing Sandoval’s jobs plan, including a call to create 50,000 jobs by the end of 2014, will not be easy, Bacon said.

The study was prepared by the Tax Foundation in collaboration with KPMG LLP, the U.S. audit, tax and advisory firm. Tax Foundation economists designed seven model firms, and KPMG modeling experts calculated each firm’s tax bill in each state. The study accounts for all business taxes: corporate income taxes, property taxes, sales taxes, unemployment insurance taxes, capital stock taxes, inventory taxes, and gross receipts taxes.

Hartley Powell with KPMG said the study should be useful for policy makers in all states because it “not only reviews the state tax obligations in all 50 states, but it shows the combined effect of all the major business taxes on seven specific firm types.”

The firm types are those that are highly sought after by states, he said.

“There are considerable differences of tax obligations across the 50 states, there are considerable differences in tax obligations by firm types within each state, and lastly there are large differences in tax obligations between mature and new firms in each state,” Powell said. “And of course, the bottom line is clear: location does matter.”

The Tax Foundation works to provide taxpayers and lawmakers reliable data and sound analysis on public finances at the federal, state, and local levels of government.


Audio clips:

Tax Foundation President Scott Hodge says Nevada’s lack of a corporate income tax is one of the most attractive features of the state:

022912Hodge :14 corporate income tax.”

Hartley Powell with KPMG says the study should be useful to policy makers in all states:

022912Powell2 :22 location does matter.”



Challenges With Unemployment Insurance Funds Could Lead To Reforms, Tax Foundation Report Says

By Sean Whaley | 3:54 pm October 17th, 2011

CARSON CITY – A report from the Tax Foundation on unemployment insurance taxes says 34 states have had to borrow $37 billion from the federal government to pay jobless benefits, and employers around the country face the prospect of higher tax rates as a result.

“Businesses are in danger of facing higher UI (unemployment insurance) taxes at a time when private sector hiring is already at a low level,” says the background paper by Joseph Henchman titled “Unemployment Insurance Taxes: Options for Program Design and Insolvent Trust Funds” released this month.

Henchman, vice president of legal and state projects at the Tax Foundation, said the adverse conditions currently existing within the unemployment insurance programs could be an impetus for reforms, such as experimenting with individual accounts to encourage saving.

“These changes can enhance the program’s ultimate goal of ensuring a viable safety net for transition periods between employment,” he said.

Nevada is one of those states borrowing from the federal government to pay benefits, an amount that totals $773 million so far. Even so, the Nevada Employment Security Council voted earlier this month to recommend against raising the tax next year from its current 2 percent average rate. The taxes are assessed on the first $26,400 of an employees’ wages.

The rate was raised in Nevada for this calendar year to 2 percent from 1.33 percent. Concerns over stifling job creation led to the recommendation to maintain the 2 percent tax rate into next year, even though it means the federal loans won’t be paid off until 2018. The rate will be formally set later this year by the state Employment Security Division.

The Tax Foundation report shows that Nevada was one of nearly 20 states with a healthy trust fund when the national recession began in December 2007. But Nevada’s highest-in-the-nation jobless rate depleted the fund and required the state to borrow from the federal government beginning in October 2009.

Of the 34 states that have borrowed to pay benefits, seven have repaid the loans, either by dipping into general funds or by borrowing instead from the private sector, Henchman said in his report.

Joseph Henchman of the Tax Foundation.

The idea of having Nevada borrow money on its own to pay benefits instead of relying on loans from the federal government was considered by the Nevada Legislature but was not pursued.

States that have repaid their federal loans are Hawaii, Idaho, Maryland, Massachusetts, New Hampshire, South Dakota and Texas.

States have to pay interest on the borrowed federal funds starting this year. Nevada was the only state to get an extension on its $22.5 million interest payment until June 30, 2012, due to the state’s high unemployment rate. Other states had to make their interest payments by Oct. 1 of this year.

In addition to raising taxes on employers, several states have opted to reduce unemployment benefits.

Nevada pays benefits for 26 weeks as do most states, although federal funding has allowed payments to be extended for up to 99 weeks during the recession.

States reducing the number of weeks of benefits are Arkansas, Florida, Illinois, Michigan, Missouri and South Carolina. Three states, Florida, Rhode Island and South Carolina, also implemented reforms to their unemployment insurance programs.

The Tax Foundation reports that in Florida, reforms include an expansion of what constitutes misconduct that would make someone ineligible for benefits, and making laid-off employees who get severance pay ineligible for benefits.

“Lawmakers have an opportunity to take a new look at benefit levels, program requirements, and whether such programs should be expected to accomplish additional fiscal and social policy goals,” Henchman said.

Nevada has not thus far considered reforms to its unemployment insurance program.

The Tax Foundation is a non-profit, non-partisan tax research organization based in Washington, DC.


Nevada 49th Lowest In Tax Burden, But 28th In Tax Collections, New Study Says

By Sean Whaley | 3:12 pm February 25th, 2011

CARSON CITY – Nevada residents bear the second lowest state and local tax burden of any state at 7.5 percent, behind only Alaska at 6.3 percent, according to a new report from the Washington, D.C.-based Tax Foundation.

But an analyst for a conservative Nevada think tank says the state’s tax collections are near the national median, and any suggestions by some policymakers that residents should pay more to fund government programs are not borne out by the study.

Nevada has consistently ranked in the top five least taxed states since the foundation first began reporting the data nearly two decades ago.

Residents of New Jersey, New York and Connecticut paid the highest state and local rates in the nation in fiscal year 2009, giving up 12 percent or more of their incomes to the tax collector, the study found.

The report also analyzes the taxes paid by residents of one state but collected in another, such as California residents who visit Nevada to gamble.

Not surprisingly, it shows Nevada collects much of its tax revenue from out-of-state visitors.

As the study points out: “Major tourist destinations like Nevada and Florida are able to lower their residents’ burden to the state by taxing tourists, who are likely to be non-residents. Nationwide, over a quarter of all state and local taxes are collected from non-residents.”

In Nevada, the state ranked 28th in terms of total state and local tax collections per resident, the report found.

But only $1,988 in taxes were paid by each Nevada resident. Another $1,799 in taxes per each Nevada resident were collected from non-residents. These two categories taken together put Nevada at the 28th place ranking in total state and local tax collections.

Geoffrey Lawrence, deputy director of policy at the Nevada Policy Research Institute, said the study clearly shows a low tax burden for Nevada residents, but a level of tax revenue that is near the median of the 50 states. The report for 2009 also does not include the major tax increases approved by the 2009 Legislature for the current two-year budget.

The 2009 tax increase will expire on July 1, 2011, unless extended by the Legislature. Gov. Brian Sandoval is opposed to any such extension and has voted to veto any tax increase approved by lawmakers.

“Regardless of who bears the burden of taxes, lawmakers still have the money to spend,” Lawrence said. “Not including the largest tax hike in Nevada’s history, the Tax Foundation report still shows that Nevada has more money to spend per capita than 22 other states. As this report proves, in terms of tax collections, Nevada is not a ‘low-tax’ state.”

Even so, some Nevada lawmakers are citing the study as proof that Nevadans are under-taxed, he said.

“So when you talk about government being somehow underfunded in Nevada, I just don’t see how that really is the case,” Lawrence said. “I would agree that a lot of funds are spent inefficiently here in Nevada.”

Sandoval has submitted a $5.8 billion general fund budget that he says contains no new taxes or fees, but some of his funding alternatives, such as shifting the cost of programs to local governments, have been criticized by lawmakers, county governments and school officials.

Lawmakers who convened Feb. 7 for the 2011 session have also heard testimony on the many program cuts in Sandoval’s budget, and the consequences of those spending reductions on everything from mental health needs to higher education.

Sandoval has said he does not want to increase the tax burden on residents or struggling businesses. Job creation is the way for Nevada to grow out of its current financial difficulties, he has said.

Audio clips:

NPRI analyst Geoffrey Lawrence says Nevada’s level of government funding is on par with other states:

022511Lawrence1 :09 you see elsewhere.”

Lawrence says Nevada government is not underfunded:

022511Lawrence2 :19 be better organized.”