A Tax Plan to Fund Nevada’s Educational & Social Service Needs

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About this report

The Progressive Leadership Alliance of Nevada (PLAN) contracted with The Center for Labor&Community Research (CLCR) to examine Nevada’s tax structure. CLCR presented to PLAN’s board an internal report titled "Taxes in Nevada" Current Realities and Future Directions" PLAN’s Tax Justice Committee used this report and our own assessment of educational and social service needs to make our tax recommendations—the Two Plus Two Proposal.

For more information about PLAN visit our web site at www.planevada.org or call our Reno office at 775-348-7557 or our Las Vegas office at 702-791-1965.

About the Center for Labor & Community Research

The Center for Labor &Community Research is a strategic organization committed to building a sustainable economy and society. It provides research, consulting services, organizing, technical, and educational services for clients and its constituencies from labor, community, business, government, policy groups, coalitions, and others.

CLCR is serious about mission and strategic vision. It is guided by the belief that "If you don't have your own strategy, you are following some else's." From its 20 years of experience in the trenches of mostly industrial communities, it is convinced that traditional strategic visions for community development are no longer effective. So CLCR has advanced its own vision in a paper, Building the Bridge to the High Road, written by CLCR’s Executive Director Dan Swinney.

CLCR creates "signature" projects. These are specific, practical projects that have three or four purposes. They demonstrate the "practicality" and “workability” of this vision or key component of the vision. Current signature projects include the Candy Institute, the Re-manufacturing Project, and Manufacturing Workforce Development Project.

CLCR is a not-for-profit organization based in Chicago, but with projects around the country, and growing international contacts. CLCR’s board includes labor, educational, business, community development, religious, and policy leaders from the US and Canada. CLCR’s budget is abut $800,000 and it has eight staff members and a network of consultants.

For more information visit CLCR’s web site at www.clcr.org or contact This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , 3411 W. Diversey, Chicago, IL 60647 Phone: 773-278-5418 ext. 13

Executive Summary

PLAN’s Two Plus Two Proposal: A Tax Plan to Fund Nevada’s Educational and Social Service Needs (2003)

Key Findings:
Per capita income in Nevada was $30,529 in 2000, ranking 14th among the states—2.9% higher than the US average, yet we rank near the bottom when it comes to funding education and social services (pp 7 & 20).

Nevada needs to raise taxes $750 million a year to adequately fund our educational and social service needs. $500 million would be used to fund education and $250 million would be used to fund social services.

Why do we need to raise taxes? Headlines tell the story: “Bleak statistics tarnish Nevada’s glitter.” “State rated low on education funding.” “Nevada among 10 worst states for kids’ well-being.” “Nevada ranks 38th in women’s health.” Medicaid suffering big shortfall.” And the list goes on and on.

The wealthy and businesses do not carry much of a tax burden in Nevada compared to other states (pp 8&9).

• In Nevada, the poor are poorer and the rich are richer than the national averages.
• The average income in the U.S. of the bottom 20% of the population is $15,600. In Nevada it’s $13,900. The bottom 20% of Nevada’s population pays 8.9% of their income in taxes.
• The average income in the U.S. of the top 1% of the population is $801,000. In Nevada it’s $1,095,000. The top 1% of Nevada’s population pays only 1.8% of their income in taxes.
• Nevada’s tax structure is the most regressive in the nation. Nevada ranks 51st in terms of progressivity compared to the other 49 states and Washington, D.C. (p 23).
• Forty-six states tax business profits or income, Nevada does not.
• Our businesses demand better-educated employees yet refuse to support education through business taxes.
• Nevada is one of only four states without a corporate income tax. The average state brings in 6.1% of its revenue from this source. Out of state corporations such as Wal-Mart and Bank of America are paying virtually no state taxes in Nevada; however, they pay these taxes in other states and remain profitable.

Recommendations:

PLAN recommends two new taxes and increases to two existing taxes. Our proposal addresses two fundamental flaws in our current tax structure: Its lack of stability and its lack of progressivity (currently, we tax the poor at a higher percentage of their income than the rich).

Two New Taxes: We recommend a 5% tax on business profits over $50,000 and a 6.8% investment tax on income over $100,000.

Two Increases to Old Taxes: Increase excise taxes on tobacco by $2 a carton and increase the alcohol tax by 50%.

If the entire Two Plus Two Proposal were adopted, it would bring in $930 million a year. The Business profits tax would bring in $341 million with $179 million coming from out-of-state sources.

The Investment tax would generate $546 million (none of it coming from middle class or low-income families). The tobacco and liquor taxes would bring in $34 million and $9 million respectively.

If the Two Plus Two Proposal is adopted, Nevada will move from 51st in terms of progressivity to 12th.

Why not tax gaming more? If we want to make our tax base more stable, we need to broaden it by taxing other businesses and industries. The Center for Labor and Community Research in a report for PLAN stated, “Indirect business taxes were 10% of output of the hotel/gaming industries, compared to an average of 8.7% for all Nevada industries. Indirect business taxes include property taxes, sales, excises and licenses.” Gaming paid $670 million in gaming taxes in 1999. Gaming’s non-casino businesses would be subject to the 5% Business tax.

Conclusion:

Last year a New York Times article stated: “Pick almost any index of social well-being, and Nevada ranks at or near the very bottom of the 50 states, though it ranks near the top in personal wealth.” To our legislators and Governor Kenny Guinn we say: “This dreadful state of affairs is going on during your watch. This is how the rest of the nation sees Nevada. Is this your legacy?”