Jim Clark: ‘The Education Initiative (business margins tax”
Ryan Summerlin March 19, 2014
I was asked to make a presentation to the Incline Village/Crystal Bay Republican Women’s Club last week. Contrary to my usual right-wing bias, I decided to present all sides, give website references so listeners could check the accuracy of my summations and let folks make up their own minds.
It was well received so I am sharing it with Bonanza readers:
WHAT IS IT?
An initiative measure appearing on the Nov. 2014 Nevada statewide ballot which, if approved by voters, would:
a. impose a 2 percent tax on gross revenues of entities doing business in Nevada;
b. require those revenues to be earmarked for state spending on education;
c. exemptions: businesses with revenues under $1M;
d. deductions: 30 percent of revenue or cost of goods or compensation paid;
e. credits: payroll taxes paid per NRS 363A.130 and 363B.110.
WHO’S FOR IT, AND WHY?
The Nevada State Education Association (teacher union) (nsea-nv.org) is the sole sponsor of the measure.
“Teachers and support professionals are highly supported by Nevadans in general. It is in everyone’s best interest for our schools to be adequately funded.”
a. “Education is everybody’s responsibility. Businesses benefit from a qualified, educated work force, yet they do not pay their fair share.”
b. “The funding can be used to reduce class sizes, more tools and technology, early childhood education, a safe and supportive learning environment, and the ability to attract and retain quality educators.”
WHO’S AGAINST IT?
The Nevada Taxpayers Association (nevadataxpayers.org), The Nevada Coalition to Defeat the Margin Tax (stopthemargintax.com) (includes Nevada Resorts Association, Nevada Retail Association, Nevada Association of Automobile Dealers, LV & Reno Chambers of Commerce, etc. etc.), the Nevada Policy Research Institute (npri.org).
WHY THE OPPOSITION?
• Nevada Taxpayers Association: “Businesses under $1M in revenues exempt but earn $1 more the entire revenues are taxed; destroys growth incentive; business could be losing money but still owe the tax; no assurance that the tax money would ever get to classrooms; this proposal would give Nevada one of the highest business tax burdens in the U.S.”
• Nevada Coalition to Defeat the Margin Tax: “Poorly written and would have unequal impact on small businesses; would drive business out of Nevada; no accountability on how the money could be spent; no Constitutional protection against future tax increases; threatens Nevada jobs.”
• Nevada Policy Research Institute: “A hybrid, combining negative features of both corporate income and gross receipts taxes hence volatile and unreliable revenue streams; distortive and destructive because such taxes ‘pyramid’ being assessed at every level of production resulting in a higher effective tax rate on more complex goods; poor definitions impose a high compliance cost for businesses.”
WHO’S ANALYZING BOTH SIDES?
The Guinn Center for Policy Priorities (guinncenter.org): A new statewide think tank founded to present measured analyses to policy issues. In their first publication they tackle the Margins Tax proposal and point out: “it is not clear that a new Nevada business tax alone will cause jobs and businesses to locate elsewhere since many factors go into that equation; if approved there will be considerable costs in Nevada administering the tax; the definition of “cost of goods sold” has spawned litigation in Texas (the only other state with such a tax); NSEA’s estimate of an additional $800M in new gross tax revenue is overly optimistic – closer to $460M; if the measure passes there is precedent in Nevada for diverting funds from education equal to the amount raised if the legislature wants to spend the money elsewhere; the margin tax would have a disproportionate impact on businesses as a percent of net income — banks would pay 0 percent, telecommunications businesses would pay 13.07 percent and other businesses would range in between.”
There you are, folks. You pays your money and you takes your chances.
Jim Clark is president of Republican Advocates, and has served on the Washoe County and Nevada state GOP Central Committees. He can be reached at firstname.lastname@example.org.