No, nobody’s raising your property tax rate. But they should.

Which radical woke liberal state imposes a bigger residential property tax burden than Nevada?

Texas!

So does the purportedly “free state” of Florida.

Property tax burdens are higher in a bunch of other self-styled freedom loving – i.e, reliably red – states, including but not limited to Indiana, Kansas, Nebraska, Oklahoma, Montana, Idaho, Missouri, Kentucky, Tennessee, one of the Virginias, one of the Carolinas, and both Dakotas.

But Texas is sort of the surprising one. In 2020, the most recent data available, Texans paid the nation’s sixth highest “property taxes as a portion of owner-occupied housing value,” according to the Tax Foundation, which is generally considered a credible research organization if not a particularly tax-friendly one.

To be fair, a lot of states Republicans would characterize as soaking in wokeness – i.e, reliably blue – also impose higher property tax burdens than Nevada.

But then, a higher property tax burden than Nevada is a low bar. Of the 50 states in your United States, the property tax burden is higher than Nevada’s in 40 of them. 

Here are the ten states at the bottom of the list ranking property tax burdens:

41. Nevada
42. Delaware
43. Utah
44. Wyoming
45. South Carolina
46. West Virginia
47. Colorado
48. Louisiana
49. Alabama
50. Hawaii

There are a lot of observations one might make about that list, some nice, some not. One of interest: Nevada, Delaware and Wyoming are also frequently lumped together as among the states most likely to look the other way while horrible people set up shadow companies in those states to avoid paying taxes, or for even more nefarious purposes. That probably doesn’t have much to do with property tax burdens per se, save perhaps as a reflection of the three states’ shared general seediness.

Anyway, since presumably you are wondering, here are the states with the highest property tax burdens, according to the Tax Foundation’s analysis of Census Bureau data:

1. New Jersey
2. Illinois
3. New Hampshire
4. Vermont
5. Connecticut
6. Texas
7. Wisconsin
8. Nebraska
9. Ohio
10. Iowa

Wait … half of them are red? 

And really wait … where’s Taxachusetts? “Tax” is right there in the state’s name for goodness sake. 

And closer to home, where oh where is the state the right loves to hate, the home of “woke ideology,” full of hapless residents tragically inflicted with “woke mind virus”? Where is California?

Oh, here it is:

34. California

Seriously, California? Is that your idea of living up to your relentlessly hyped (by Republicans) and perpetually echoed (again, by Republicans) image as a radical liberal tax-and-spend People’s Republic of Woke? Because a low-to-middling rank sandwiched between Montana (33) and Idaho (35) isn’t scaring anybody.

According to the Tax Foundation analysis, property taxes account for about a third of all state and local taxes collected in the U.S., “more than any other single source of revenue.” Except in Nevada it’s not a third, but less than a fourth. (Side note: Your Nevada mining industry has always vociferously insisted to anyone who will listen that the mining tax is in fact a property tax. It’s not clear whether the Tax Foundation counted it as such in its analysis, but it wouldn’t make any difference either way. While important in mining counties, relative to total state and local tax revenue, Nevada’s mining tax is negligible.)

The largest source of state and local taxes in Nevada is of course not the property tax. It is the tax that more than any other hits low income people the hardest, and isn’t particularly nice to small businesses either, the sales tax, accounting for about 40% of total revenue.

Which brings us to another research organization, one which, like the Tax Foundation, is also highly regarded on both sides of the economic aisle, the Institute on Taxation and Economic Policy, or ITEP.

It’s not really about property taxes

For years ITEP has periodically produced a report titled “Who Pays?” which analyzes tax inequality in the states. The most recent one was in 2018, but since then Nevada’s tax structure is just as if not more reliant on sales taxes than it was then. Citing, among other factors, the state’s reliance on sales tax, ITEP concluded “Nevada has the fifth most unfair state and local tax system in the country” and “incomes are more unequal in Nevada after state and local taxes are collected than before.”

As illustrated in this ITEP chart, Nevadans whose incomes are in the lowest fifth pay 10.2% of their income in state and local taxes, while people with higher incomes … don’t:

There is however something that people in upper incomes tend to pay far more commonly than people in lower incomes: property taxes. 

But in Nevada the property tax burden on higher earners is a fraction of the sales tax burden on lower earners.

And while the amount of sales tax people pay increases commensurately with inflation, property tax increases in Nevada are artificially capped (a variation of a concept imported from California, by the way).

Property taxes are not on ITEP’s list of reasons Nevada’s tax structure is so unfair. 

The reason Nevada’s tax structure is so unfair is the aforementioned reliance on a regressive sales tax, combined with the absence of a progressive state income tax. That tax structure, or lack of one, if you will, is why that chart looks the way it does.

Callous, but deplorable

Over the 26 years I’ve been writing about Nevada policy and politics, there has never been anything remotely approaching an organized effort to establish an income tax in Nevada. Not even a progressive (in the mathematical, not political, sense) income tax which would levy a relative pittance and only on those earning more than, say, $250,000 a year, with rising rates from there. 

Every person who has given the subject a little more than casual thought – which is to say your average more-or-less sentient elected official and the lobbyists who pretend to be their friends – secretly knows that Nevada’s absence of an income tax is a policy farce. The smarter ones among them secretly know that pairing the absence of an income tax with an unusually high dependence on the regressive sales tax is not merely a farce, but callous and deplorable.

And few if any of those people bother to say that out loud, let alone try to change the state constitution and, you know, do something about it.

So we’re not going to have an income tax.

But we’ve got a property tax. Perhaps we could give lower income Nevadans a break for a change by cutting the sales tax rate, and compensate by raising property taxes?

Better still, perhaps we could cut the sales tax rate and more than compensate by raising the property tax a little and Nevada’s lowest-in-the-nation gaming tax rate a lot. Or by adjusting property tax rate tiers so the bigger the commercial property, the higher its rate. Or by establishing a business/corporate income tax (no constitutional amendment required). Or by all of the above.

Ha, as if. Any proactive impulse demonstrated by the Nevada Legislature over the years has been confined to giving tax money away to special interests, and has not extended to making the overall tax structure more fair and equitable.

One thing on the table in the current legislative session is a painfully modest bill that might  – might – result in people paying a teensy bit more property taxes than they otherwise would, and only in extraordinary circumstances. It is the weakest possible property tax reform. 

Another proposal, perhaps slightly less modest, would tack a nickel-ninety-eight on to a home purchase by raising the one-time property transfer tax. In other words, it is not a property tax increase. 

The worst thing about that bill is it doesn’t remove the loophole that shields the resort industry from property transfer taxes when it sells its properties to investment trusts and then rents them back – a practice that  a) has transformed ownership up and down your Las Vegas Strip, b) is a classic case of moving money around in a swirl of financial jiggery-pokery that adds nothing useful whatsoever to Nevada’s economy or people, and c) deprives schools and other vital local government programs and services of money.

Both measures, if passed, would cost existing property owners either next to nothing, or simply nothing. Alas, they both contain the words “property” and “tax,” and so are eliciting squeals of outrage from the uninformed and the lobbyists who love them.

Such squealing is not justified. But if the squealers, be they property owners, real estate professionals, or both, are so deeply alarmed about the property tax burden in Nevada, perhaps Delaware or Wyoming would be more to their liking. Both states have a lower property tax burden and the same seedy vibe.