The Private Bank by Nevada State Bank released the fifth of its High Net Worth reports today. The research report prepared by local market research firm Applied Analysis found that the state of Nevada has slightly more equitable income distribution than the nation as a whole; however, when it comes to the expiration of the Federal Insurance Contribution Act (FICA) holiday, it is Nevada’s lower income brackets that are bearing a greater share of the tax hike.
“The FICA increase applies only to the first $113,700 in wages earned. This means that lower income, working households end up paying a higher relative tax rate. Investment earnings are also not subject to the federal payroll tax, further shifting the burden to lower-income families,” noted Jeremy Aguero, principal analyst with Applied Analysis and lead researcher on the Private Bank’s High Net Worth research project.
Aguero cautioned that this element of the nation’s tax reforms should not be viewed in isolation, as higher marginal income tax rates, capital gains tax rates, and some deduction limitations disproportionately affect those with higher incomes.
“The payroll tax increase remains a material consideration for higher-income families, not only due to increased personal liability, but also because it reduces the take-home pay of employees and will pull roughly $1.8 billion out of Nevada’s economy each year,” stated Russell Price, executive vice president of The Private Bank by Nevada State Bank.
Price noted that many of the bank’s clients are watching the economy closer than ever as they contemplate investment opportunities.
“Congress’ actions earlier this year created a new layer of uncertainty, and put some back into wait-and-see mode,” Price added.
Additional findings from the report include:
- In terms of income inequality, Nevada bettered the national average and placed 33rd nationally (where 1st is the state or territory with the highest degree of income inequality). Puerto Rico and Washington, D.C. reported the highest degrees of income inequality in the United States; Alaska and Wyoming reported the lowest.
- The Reno metropolitan statistical area (MSA) reported a slightly higher degree of income inequality than did the Las Vegas MSA.
- The average Nevada household reporting an income below $500,000 can expect to bear nearly all of the 2.0 percent tax increase. The average household earned $30,511 in wages, according to the latest publicly reported IRS data. Overall, those making below $500,000 in the state will be responsible for paying 98.9 percent of the expected FICA tax increase, despite making up only 97.2 percent of the state’s reported income.
- Those making $500,000 to $1 million will experience a 0.5 percent increase on average.
The Private Bank publishes the “High Net Worth Report” monthly. Briefings are available on Nevada State Bank’s website at www.nsbank.com/HNWreport or by contacting The Private Bank directly at 702.855.4812.
About The Private Bank by Nevada State Bank
The Private Bank by Nevada State Bank provides a full range of personalized financial servicesfor high net worth and high-income clients, including deposit and lending services and wealth management planning. The Private Bank by Nevada State Bank is an unincorporated division of Nevada State Bank that provides specialized banking services to significant net-worth clients. Nevada State Bank is a full-service retail bank that has been chartered by the state of Nevada and is insured by the FDIC.
About Nevada State Bank
Nevada State Bank, with assets of more than $4.0 billion, is the largest state-chartered bank in Nevada. A full-service bank with 50 branches statewide, Nevada State Bank offers a complete range of consumer, private and business banking services. It is a subsidiary of Salt Lake City-based Zions Bancorporation (Nasdaq: ZION), one of the nation’s premier financial services companies. With affiliates in 10 Western and Southwestern states, 139-year-old Zions Bancorporation has assets of $55.5 billion. For more information on Nevada State Bank, call 702.383.0009 or access www.nsbank.com.