Economic recovery yields more tax dollars than anticipated in Nevada

The five-member panel responsible for economic forecasts on Tuesday reviewed how the pandemic, federal funds and changes approved by state lawmakers earlier this year affect their earlier forecasts.

Though hotels and casinos continue to struggle, Nevada has collected 34% more in tax revenue than forecasted last year. 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 and $5 million, respectively. The revenue streams have particular importance in Nevada, which does not impose state income taxes on residents.

The state’s economy relies heavily on tourism and in-person entertainment, and there are 66,200 less workers employed at casinos and hotels than there were before the pandemic. However, the number of residents employed in industries such as warehousing has surpassed pre-pandemic levels and 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%.

“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,” said David Schmidt, an economist at the Department of Employment, Training & Rehabilitation.

The recovery has been uneven, disproportionately affecting minority groups, people without high school diplomas and women with young children, economists said.

The state will likely have more to spend in the next two budget years due to federal relief funds and a mining tax increase passed in May.

However, the Nevada Supreme Court’s ruling that an extension of a payroll tax was unconstitutional because it didn’t win two-thirds approval in the statehouse will cost the state an estimated $197 million over three budget years, economists said. The reimbursement and reduced tax rate will be partially offset by the mining tax increase. Russell Guindon, a fiscal analyst in the Legislature, said Nevada expected to collect more than $80 million in proceeds from mines in each of the next two budget years.

The state expects to receive $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 five-member Economic Forum. "If you can use it for government services, then you’re not using other revenue sources for government services.”

By Sam Metz