Study shows Nevada relies too heavily on gambling, sales taxes

LAS VEGAS -- A state tax study shows Nevada has one of the least diversified economies in the nation.

The study revealed Nevada earned 85.8 percent of its 2001 state tax revenue from sales and gambling taxes -- nearly double the national average.

The report was prepared by the Governor's Task Force on Tax Policy in Nevada. It recommends ways to increase the state's tax base to help eliminate projected budget deficits. The task force's final report released last week, which rejected increases in gambling and sales taxes, recommended levies on property, alcohol, tobacco, entertainment and business receipts that would amount to more than $300 million next fiscal year and more than $500 million the following fiscal year.

Nevada relies heavily on sales and gambling and casino entertainment taxes, compared with other states that draw on similar revenues. The study warned those lopsided numbers could mean trouble for the state if it does not find new sources of income.

"If the state is to continue to afford the levels of services today, the current revenue mix of the state will not be sufficient to support that level of service," the report stated.

Though some have called for increasing taxes on casinos, proponents of broader-based taxation have argued Nevada cannot continue to count on sales and gambling taxes because the industry is so volatile.

The study also found Nevada ranked among the 10 lowest states in per capita spending on education, public welfare, hospitals, health and parks. And it didn't receive as much money on average as other states from federal and other outside funding.

Other states on average received 20 percent of their funding from other government sources in 2000, but Nevada only got 14.5 percent.

A Las Vegas economic analyst said the state was trying to obtain more federal money.

"We have been almost last in every category of federal funding, but we're doing better," said Jeremy Aguero, a task force consultant.

Guy Hobbs, chairman of the task force, said the report wasn't all bad news. He said Nevada has a healthy tax climate for businesses, and the state has options.

"We have tax capacity," Hobbs said. "It means that we have more flexibility in the future."