Nevada’s tax revenues that fund the state budget are significantly higher than predictions made from the state’s Economic Forum back in May 2021 by 25 percent or around $798.1 million ahead of projections. Revenue from the state’s sales and use tax throughout the 2022 fiscal year which spans between July 2021 to June 2022 has exceeded the revenue expectations by more than $260 million due to higher wages and consumer spending. According to fiscal year 2020 data from The Pew Charitable Trusts, Nevada is one of nine states that has no tax on personal income with 58 percent of tax revenue coming from general sales tax, 24.4 percent from selective sales tax, 6.7 percent from licenses, 3.7 percent from property tax, 1.3 percent from severance and 7.9 percent from other tax sources. Nevada relies heavily on revenue from high sales taxes on everything from groceries, clothes, alcohol, gambling, and taxes on casinos and hotels.
Being the home state of Las Vegas, Nevada’s economy is dependent on the travel, tourism, and hospitality industries which have experienced hardships throughout the COVID-19 pandemic. But with the percentage fees tax, a monthly tax on gross gaming revenue, exceeding expectations by nearly $274 million; revenue from the live entertainment tax about $79 million higher than projected; and Nevada’s unemployment rates decreasing to near pre-pandemic levels, the state’s tourism and hospitality-driven economy looks to be making a strong recovery. Multiple factors have contributed to this unanticipated surplus of revenue gains from sales tax collections in Nevada.
The arrival of vaccines, federal stimulus checks, higher wages, increased savings, and isolation fatigue among residents in areas like Clark County, all created this demand from consumers that started to arise after restrictions were lifted. But with ongoing global supply chain issues and certain industries still struggling to recover from the last two years, supply can not meet demand causing inflation. And as inflation rises so does the amount of tax revenues that are generated which can possibly lead to a state budget surplus.
This surplus makes it possible for Nevada to refill its “Rainy Day Fund” since it alongside New Jersey was among the only two states that had to completely empty their rainy day state fund during the pandemic. This endeavor seems to be progressing tremendously due to the high performance of state tax revenues. In fact, Nevada State Treasurer Zach Conine announced back in January that Nevada’s “Rainy Day Fund” hit a balance of $340 million which is about 85 percent of the pre-pandemic high of $401 million.