Nevada has no income tax, no corporate tax, no inventory tax, and no capital gains tax. Should the rest of the country be taxed to give money to Nevada? The idea that some State and local governments can avoid taxing their citizens, but expect to receive federal tax dollars is a question of fairness and equity. Perhaps the federal government should base allocations to States based on their willingness to act fiscally responsible?

Some States Pull Their Weight

Low Taxes Myth

There is a myth that low State taxes attracts businesses, that in turn, attracts jobs for the citizens. In Nevada, the tax haven does attract companies, but only those that seek to dodge taxes. The Sierra Nevada Corporation is a prime example. They are a private defense contractor that, among other things, seek to become the next privatized NASA.

The Sierra Nevada Corporation sounds like it would be a major employer in Nevada. It is not. Currently, it claims to have over 3,500 employees in 33 locations around the world.  In 2014, about one-third of its employees were in Colorado and the potential job growth is at its Colorado facilities.

However, its corporate headquarters is in Nevada. The company was founded in Nevada; however, the State does not have the caliber of workers needed for the high technology jobs. So why not move the company to Colorado? Because the corporate staff and the company enjoy the tax immunity of Nevada.

Freeloader States

According to WalletHub.com, the ten State governments that are most dependent on federal money are as follows:

1. Louisiana
2. Mississippi
3. Arizona
4. Kentucky
5. New Mexico
6. Montana
7. Oregon
8. Tennessee
9. Missouri
10. Alaska

These States are the top ten with the lowest taxes on their residents, (with the ranking of federal dollar dependency,) according to USA Today (Taxes on corporations are not included):

1. Alaska (10)
2. Wyoming (20)
3. South Dakota (14)
4. Tennessee (8)
5. Louisiana (1)
6. Texas (21)
7. New Hampshire (31)
8. Nevada (36)
9. South Carolina (29)
10. Oklahoma (26)

Three of the top five having the lowest State taxes are also among the top ten State governments most dependent on federal money. The residents of another three of the top ten States with low taxes are in the top fifty percent in dependency on federal subsistence.

Five of the top ten States (Alaska, Wyoming, South Dakota, Texas, and Nevada) with the lowest taxes have no State income tax.

Pulling Their Weight

Many States use federal money to supplement their own tax revenue. It is only fair that they should. It is unfair that some States tilt the tax revenue field and expect federal money to replace State revenue. Perhaps it’s time that federal money should be restricted from States that do not have an adequate local and State tax structure to provide a foundation for services for their citizens before federal money is given to them.