How does Nevada Compare to Other States in 2020?
In previous years, annual reports showed a state more susceptible to U.S. economic ups and downs than others. When times were good, millions of tourists brought their money to Nevada, and the numbers showed a prosperous state that often led the nation in growth, despite chronic concerns about low rankings for education, healthcare and crime. When downturns came, although Nevada was more impacted than other states, experts always predicted that the Silver State would soon rebound into prosperity, and those predictions were proved true, time and again.
Then came 2020. The policies put in place by federal and state officials in response to the COVID-19 virus unleased an unprecedented wave of economic destruction that has devastated Nevada’s tourism-driven economy. The results are just now starting to show up in the numbers: people unemployed, businesses shuttered, children uneducated and opportunities lost. Compared to other states this year, Nevada is struggling as never before, and the final impact of this crisis won’t be reflected in statistics for many months.
Travel & Tourism
Travel, tourism and gaming have always been the engines that drive Nevada. When those engines stop running, the state’s economy comes to an abrupt halt. Year-over-year numbers from March 2020 show that visitor volume dropped by more than half, with other economic indicators in line with that figure. With hundreds of thousands of jobs and billions in tax revenue at stake, Nevada’s resorts will have to reinvent themselves (again) if they are to survive. Economic diversification has always been a goal, but it assumes vital importance now, when Nevada’s reliance on tourism has proved how risky it can be.
Despite the persistent rumor, Nevadans don’t actually live in hotels or spend all their free their time gambling. In fact, Nevadans enjoy a robust offering of activites outside of what a tourist might see. From the beauty of Lake Tahoe in northern Nevada to the majesty of Red Rock in southern Nevada, the outdoor activities in Nevada alone provide a range of options for those that live in the Silver State. A comparison of lifestyle statistics shows that Nevadans, especially those in major population centers, aren’t that different from other Americans, considering factors such as average age, household income and church attendance.
Nevada’s elementary school students perform much worse than the national average on standardized tests, its teens are more likely to drop out of school and its adults are less likely to have a college education. Nevada’s education ranking at or near the bottom of national ratings continues to be a major stumbling block in efforts to diversify the economy. It frustrates economic development agencies, which would like to lure companies by advertising a great school system and an educated workforce. School closures and the switch to distance learning due to COVID-19 concerns will hopefully introduce new innovations.
One bright spot in Nevada’s profile is that its tax burden is lower than many other states’. The Silver State has no personal income tax, no inheritance or gift tax and no estate tax. It also offers a favorable tax climate for businesses, with no corporate income tax, no unitary tax, no admissions tax and a relatively low employer payroll tax. The nonprofit Tax Foundation ranked Nevada seventh among tax-friendly states for business. However, this may change during the next legislative session, as lawmakers struggle with a $1.2 billion budget shortfall.
Cost of Living
The cost of living in Nevada, calculated for its two major metropolitan areas, is not that different from the national average, with the Reno-Sparks region slightly more expensive than southern Nevada. Since the index does not take Nevada’s lower tax rate into account, the actual cost of living in Nevada is less than these numbers show, and $100 in Nevada will buy $102.46 in goods and services.
Cost of Doing Business
It costs less to operate a business in Nevada than in many competing markets, according to The Boyd Company, which compares payroll costs, lease rates, business taxes and workers comp costs. Distribution centers in northern Nevada are close to the California market but without California’s high prices, and food processing plants in southern Nevada provide products for both the local and national markets. Lease rates for commercial real estate compare favorably with those in competitive Western markets.
Despite advances in recent years, the numbers for healthcare in the Silver State remain a chronic concern. According to national rankings, Nevadans, especially those in rural areas, are less able than residents of other states to access affordable healthcare. In addition, many lack health insurance, a situation which is likely to escalate as out of-work people lose employer-paid insurance and their COBRA insurance runs out. Those needing treatment face a shortage of physicians and other healthcare professionals. While Nevada’s hospitals and doctors are managing during this pandemic, it is putting even more strain on an already challenged system.
Despite statewide shutdown orders and edicts, the coronavirus has done a number on Nevada, both in a health capacity as well as from an economic perspective. The number of Nevadans with confirmed cases of COVID-19 rose steadily from March through July. However, testing is on the rise, whether in response to symptoms or as a requirement for work, and officials learn more about the virus all the time. The death rate increased from March through July, although a death rate of 25 per 100,000 population equates to only 0.00250 percent. More recent numbers suggest the rate of infection may be slowing.
According to numbers maintained by the FBI, Nevada is a dangerous place to live, ranking No. 6 for violent crimes per 100,000 population. However, it’s important to consider the key phrase: “per 100,000 population.” Nevada’s official population is around 3 million, but the millions of visitors coming through every year increase the number of people in Nevada at any given time, and chances are good that some of them come with bad intentions. It remains to be seen if the stress caused by the COVID-19 crisis will cause violent crimes to increase, or if the worsening economy will drive people to commit more property crimes.
For the first few months of 2020, numbers indicate that the Nevada housing market remains stable and is doing even better than last year. Past-due mortgages and foreclosures are lower than in most states, in stark contrast to what happened to Nevada after the housing crash of 2008, when it led the nation in foreclosures for several years. Today’s rosy numbers are unlikely to continue, however, as homeowners who have lost their jobs or businesses find themselves unable to keep up with mortgage payments. Results from the third and fourth quarter of 2020 may well paint a very different picture.
Unemployment figures present a chilling view into how Nevada’s economy has suffered from the emergency shutdown orders made by Gov. Sisolak in mid-March. As businesses closed their doors, some permanently, the unemployment rate soared from 3.6 percent in February to 28.7 percent in April, easing a little only after some businesses were allowed to reopen. It took seven years for the state to rebuild its unemployment trust fund after the recession, when Nevada’s rate led the nation at 14 percent in 2010. When the fund is depleted this time, which may be soon, the state will have to build it up again – most likely by raising unemployment taxes and/or reducing benefits for new filers.
Like the rest of the nation, Nevada is facing major challenges this year. Some, like the quality of education and healthcare, have been concerns for decades. Others, like the economic fallout from the COVID-19 crisis, were unanticipated. Nevertheless, Nevada remains an attractive place for operating a business and continues to rank near the top in surveys of business-friendly states because of its tax climate, the cost of doing business relative to its competitors, and its location near major West Coast markets.
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