Raggio urges examination of state taxes

CARSON CITY -- Senate Minority Leader Bill Raggio on Monday pitched the need for a state-financed tax study, noting that one hasn't been performed in 20 years.

"Why would anybody be afraid to have a tax study unless they are afraid of the outcome?" Raggio, R-Reno, said during a Senate Finance Committee hearing.

Raggio is sponsoring Senate Bill 399, which would set aside $300,000 to hire an independent firm to look at whether state and local tax growth is keeping pace with population growth.

"We have some shortcomings," said Raggio of state taxes. "But this doesn't mean it (a study) is being done to raise taxes."

The committee took no action on the bill.

During a presentation on the proposed study, Raggio noted that Nevada's average tax burden on residents has consistently been ranked among the five lowest in the nation by the Tax Foundation, a nonpartisan tax research organization based in Washington, D.C.

The foundation in August reported that Nevada has the nation's second-lowest, state and local tax burden at 6.6 percent of residents' income. The national average was 9.7 percent.

Nevadans on average pay $3,245 a year in state and local taxes, according to the Tax Foundation.

The foundation study did not consider state and local taxes paid by tourists.

When those taxes are added to the mix, Nevada ranks 25th nationally in its state and local tax burden.

Alan Schlottman, an economics professor at the University of Nevada, Las Vegas, questioned whether a tax study would find anything new about the state tax structure.

Schlottman is also executive director of the Theodore Roosevelt Institute, a Las Vegas-based think tank that researches taxes, economics and land issues.

In the fall, the institute reported that Nevada's fiscal crisis is similar to difficulties faced by other states and not a problem with the taxes in effect here.

"There is no magic tax that can explain the current fiscal situation," he said. "All Nevada tax revenues are tied to the economy and react to it in various degrees."

Simply raising a specific tax or taxes does not reduce the volatility of the revenue, Schlottman added.

The fate of the tax study supported by Raggio probably won't be decided until the end of the session. If approved, the study wouldn't be completed until 2011.

Lawmakers might approve tax increases long before then.

A recent legislative fiscal analysis estimated the state's budget shortfall at $2.2 billion. Most legislators are declining to take a position on tax increases to make up the shortfall until after the May 1 meeting of the state Economic Forum.

The forum, a group of five business people, determines how much revenue will be available for the state to spend over the next two years.

Raggio said the state's last tax study -- the $500,000 analysis that Price-Waterhouse performed in 1989 -- did not gather dust just sitting on shelves.

But legislators ignored the study's two major findings. Price-Waterhouse proposed a 3 percent business profits tax and a requirement that consumers pay sales taxes on services such as dry cleaning and auto repairs.

Contact Las Vegas Review-Journal Capital Bureau reporter Ed Vogel at evogel@ reviewjournal.com or 775-687-3901.