Lawmaker sets stage for discussion on ‘modernizing’ tax revenue structure

Lawmaker sets stage for discussion on ‘modernizing’ tax revenue structure
Sales tax is the top generator of funding in Nevada. Photo by Craig Adderley from Pexels

by April Corbin Girnus, Nevada Current

CARSON CITY–Although the dollar amount of Nevada’s General Fund increases each year, after adjusting for inflation and population, its per capita dollar amount has remained relatively flat over the past three decades, the state’s chief fiscal analyst told lawmakers Wednesday.

Democratic state Sen. Dina Neal, who is chairing a new joint interim committee on revenue, is hoping that context will help frame a discussion on “modernizing” Nevada’s tax revenue structure.

In 1990, Nevada collected $802 million in general fund revenue to support a population of 1.2 million people. Three decades later, in 2020, the state collected more than $4 billion to support 3.1 million people.

When adjusted for inflation, that’s equivalent to a general fund revenue of $648.80 per person in 1990 and $639.70 in 2020, according to data presented by Russell Guindon, chief principal deputy fiscal analyst for the Legislative Counsel Bureau. 

(Chart by the Fiscal Analysis Division of Legislative Counsel Bureau)

“We need to think about all these factors,” said Neal after an afternoon of presentations on unemployment rates, wage and salary growth and inflation. “What does it mean when we fail to capture a tax base?”

Neal referenced a failed bill she sponsored during the 2021 legislative session that would have created a digital goods tax — essentially a sales tax for intangible products like streaming services and downloads, which aren’t currently subject to Nevada’s sales tax. Analysts estimated a digital goods tax would bring in $8 million to $9 million in new revenue annually to the state general fund.

“The argument that was made in 2021 was that we were not in a position as a state — that the citizens were not in a position — for a digital goods tax. The question now that I am considering and thinking is: Can we afford not to have a digital goods tax? When we know there is a shift in consumption and our sales tax statutes are not meeting that. At the end of the day citizens are still going to rely on services. There are still caseloads.”

Neal, who was first elected to the state Assembly in 2010 following The Great Recession, said Nevada has been stuck in a mindset where the best time to raise or adjust revenue is during times of crisis.

“I actually disagree with that. I actually believe that we should plan for our future and make sure that we have enough revenue coming in for our services and how we’re growing, to make sure that it’s sustainable.”

Jackson Brainerd of the National Conference of State Legislatures, who gave a presentation about national tax trends, added that adjusting revenue structures only when necessary because of a crisis is a historical trend for most states.

“That’s just the political nature of having a better budgeting situation,” he said. “People are less inclined to take up the tough, long-term stuff that needs to be addressed.”

Since the pandemic began, Nevada’s economy has been propped up by federal stimulus. Data has shown that Nevadans personal income rose during the pandemic despite hits to people’s wages and salaries because of stimulus checks, expanded unemployment benefits and the advance child tax credit payments. Many of the emergency budget cuts made after the initial shutdown decimated revenue collections have been restored thanks to relief funding.

“Because we had the stimulus dollars flow into our budget, everybody’s now like, ‘Oh we’re sitting pretty,’” said Neal. “I see it as not our money. It wasn’t money we generated. It wasn’t money we produced.”

The American Rescue Plan Act, from which Nevada will receive an unprecedented $6 billion, will continue to support the state until 2025.

But what about after?

“In 2025, we may see an entirely different landscape,” said Neal. “I’m a pre-planner. I like to plan for what could be rather than try to haphazardly move policy in 2025 when people are scrambling and trying to figure out how to take care of the needs of our state.”

Wednesday’s meeting contained no substantive votes or extensive discussion between lawmakers but offered some framing for what may be discussed in the months to come.

Neal suggested that proactive revenue planning would be a recurring theme for the interim committee and joked she was building up her “modernization persuasion tactics.” And when Republican Assemblyman Gregory Hafen light-heartedly told the committee he was hopeful they could “lower some taxes,” Neal promptly shot back, “Uhm. No.”

Nevada has modernized some of its tax statutes in recent years. In 2019, the Legislature passed a bill to require the collection of sales tax by online “marketplace facilitators” like Amazon or Ebay, which sell products online. That bill, which was prompted by a Supreme Court decision, brought uncaptured revenue to the state, and fiscal analysts have said it softened the blow of the pandemic shutdowns in 2020.

Other efforts have fallen short.

In 2021, Neal proposed ending the existing Live Entertainment Tax exemption for major league professional sports teams (currently, the Las Vegas Raiders and Vegas Golden Knights). In 2019, then-Assemblyman Alexander Assefa proposed a vehicle mileage tax that would charge drivers based on miles driven — an effort designed to offset the shift toward more fuel efficient and electric vehicles, which has resulted in less fuel tax revenue for the State Highway Fund. Neither of those proposals made it beyond committee. Various proposals related to updating Nevada’s property tax have also failed in recent years.

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