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Recovery yields more tax revenue than anticipated in Nevada


By SAM METZ AP / Report for America

CARSON CITY, Nev. (AP) — Nevada’s economy is rebounding more quickly than in some past recessions, but coronavirus variants continue to raise questions about the state’s path toward full recovery.

The five-member panel responsible for economic forecasts on Tuesday said the state had collected more sales and entertainment taxes than forecasted, but would have less revenue because a state court struck down a payroll tax.

David Schmidt, an economist at the Nevada Department of Employment, Training, & Rehabilitation, said indicators like the employment rate and the hire rate had diverged by region and sector throughout the recovery; the unemployment rate in northern Nevada has rebounded to a greater extent than it has in the Las Vegas area and sectors like warehousing are employing more people than they were before the pandemic, while casinos and hotels are far from pre-pandemic employment levels.

Though hotels and casinos continue to struggle, Nevada has collected 34% more in tax revenue than forecasted last year, economists said. The state has collected $385 million in sales and use taxes since June and $38 million in live entertainment taxes. Economists initially projected collecting $294 million and $5 million, respectively.

The revenue streams have particular importance in Nevada, which does not impose state income taxes on residents.
In a state where the economy relies heavily on tourism and in-person entertainment, there are 66,200 less workers employed at casinos and hotels than there were before the pandemic. However, restaurants and bars are employing almost as many people as they were before the pandemic.

Nevada’s unemployment rate fell almost 5 percentage points from October 2020 to October 2021, but remained the nation’s highest at 7.3%. The recovery have been uneven, disproportionately affecting minority groups, people without high school diplomas and women with young children, Schmidt said.

“We’ve been in a slower growth phase for the last six to nine months. The current recession has been incredibly focused in the Las Vegas area, and the casino-hotel industry, in particular,” he said.

Decisions from the Legislature and the courts required the Economic Forum to revise some of its previous revenue projections.

The state Supreme Court ruling that the Democratic-led Legislature violated the state constitution by extending a payroll tax will cost the state an estimated $197 million over three budget years, economists said. The extension didn’t receive the two-thirds support required to raise state taxes in 2019 and, due to the decision, businesses will be refunded part of what they’ve paid since 2019 and pay less in the future.

The losses cut into what Nevada expects to collect toward its general fund for state spending, but will be partially offset by a mining tax increase passed in May, which earmarked revenue for K-12 education. Russell Guindon, a fiscal analyst in the Legislature, said Nevada expected to collect more than $80 million in proceeds from mines in the each of the next two budget years.

The state expects to receive a total of $6.7 billion in federal coronavirus relief funds, most of which is earmarked for specific services such as healthcare, education or housing. However, the funds will allow the state to better weather losses in payroll tax revenue and replenish budgetary reserves it spent through the pandemic.

“Money is money,” said Craig Billings, a casino executive who serves on the Economic Forum.

“If you can use it for government services, then you’re not using other revenue sources for government services.”

Metz is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.

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