Newspaper column: How the margins tax on the 2014 ballot would harm businesses

Voters will be asked next November whether to impose a 2 percent margins tax on Nevada businesses that have gross revenues in excess of $1 million, a proposal put forward by the Nevada State Education Association as a means of funding K-12 education.

Business leaders will soon be starting a campaign warning voters about the harm this tax would do to businesses, as reported in this week’s newspaper column, available online at The Ely Times and the Elko Daily Free Press.

“It will have a huge impact on our members that have revenue of a million dollars, which in a small business is not that large,” warns Bryan Wachter, director of public and government affairs for the Nevada Retailers Association. “They allow you to have a deduction for cost of goods sold, you can deduct compensation, or you can take a standard 30 percent deduction. They let you take that and then you apply the tax to that number. The problem with that is it completely ignores how a small business operates.”

Wachter said there is no deduction of anything else that goes to the bottom line of a business, such as rent and utility costs. Though a business incurs both compensation and cost of goods sold, it must choose one or the other to deduct and not both.

He said a small business that sells $1 million in goods might have a profit of only $60,000 a year. “When you have a tax that could potentially come in at $15,000 or $30,000, you’re putting a lot of businesses in a position where they have to choose to stay in business or not stay in business,” Wachter said.

The retailers are a part of the Committee to Protect Nevada Jobs, which also includes gaming, trucking, agriculture, banks, car dealers, restaurants, manufacturers and more.

Carole Vilardo, president of the Nevada Taxpayers Association, said businesses will treat the tax as just another expense of doing business.

“When I go to my accountant and calculate all my expenses, he comes back and says to me, ‘Your margin is not enough.’ I have a couple of things I can do. I can raise my prices, if the competition will let me, which means you, John Q. Public, is going to pay my taxes that I have to pay. Or I can freeze salaries. I can reduce hours of employees. I cannot hire for vacancies that I had. In the worst-case scenario I may have to let go an employee or two. …” she said.

Read the entire column at Ely or Elko website.

12 comments on “Newspaper column: How the margins tax on the 2014 ballot would harm businesses

  1. Steve says:

    I keep hearing the argument based on studies performed over several years that retail prices in low tax states compared to retail prices in neighboring high tax states do not vary.
    These prices are even across the region.
    This makes for the argument that increasing taxes on business won’t effect them negatively in one little bit, they will simply “absorb” the new drain on their resources.

    I suspect the studies in question failed to take into account the fact those business’s that are large enough to cover a region are able to spread the costs of high taxes over that entire region and maybe even the whole country. This means we are paying for California’s higher taxes and northern Nevada is paying for Clark County’s higher tax. At least when we shop in those larger stores.
    A study based on discovering the percentage of tax paid per gross in each state and locality compared to the surrounding region would be far more telling regarding the effects of taxes on business and would lead to some clarity the impacts of taxes on single shop operations.
    It’s really not possible to compare single shop outfits to others in a region, they don’t have equal models for operations and sales. After all they are generally single owner under an LLC or rarest of rare today, sole proprietor.

    Consider the single shop small business. Employing around 75 people. These places are living on the edge already and paying the bare minimum to keep their better employees while starting people at very low wages and bringing them along over time. There are a lot of these around and they are really the backbone of the economy. A tax such as this would not put them out of business though it would very likely force them to cut employees and discontinue services not as profitable as other portions of their business. This impacts all their suppliers and sends business elsewhere looking for those services and products no longer available here.

    Actually, Rincon detailed how that happens in a post quite a few months ago. His office keeps teeth cleaning low cost by not testing pets for allergies to sedation. (If memory serves). This is a good example of a small business responding to overhead, high taxes and competition. Raising his taxes would only make him look for more ways to spend less.

  2. iShrug says:

    And they wonder why we shop online. I like to support local businesses, especially small family businesses where they remember my name and give great service.

    But for many items, I buy online. I don’t have to drive, I save time, money, and gasoline. Hey I don’t even have to get dressed! And, I’m “saving the planet.”I lol

  3. No sales tax in most cases.

  4. Milty says:

    A lot of people are oblivious to how all encompassing the million dollar revenue threshold is. There are a lot of convenience stores with gas stations that have a million dollars a year in revenue.

  5. Voters should put politicians feet to the fire and ask them if they support or oppose this 2014 Nevada ballot initiative. Yours truly, EDDIE InLiberty HAMILTON, is strongly opposed to the Teachers Union proposal because the tax will kill jobs thru the elimination of small business job providers.

    Hamilton is a duly elected member of the Nevada Republican State Central Committee and the Conservative Choice, as well as the Tea Party Voice, for GOVERNOR of NEVADA in the upcoming June 10, 2014 Republican primary election. Candidate Eddie InLiberty Hamilton is thus challenging incumbent el Governor hermanito (bro) senor BS (initializing of B. SANDOVAL).

    The GOP governor Sandoval’s conservative rating has plummeted to a mere 36% due to his rapid moving to the “dark side” by raising taxes incl. DMV car/truck registration fee, by growing the state government by the billions of dollars, and thru his enthusiastic support (subsidies) for non-citizens who live here without proper entry papers.

    Follow up stories on or on Twitter @ElectHamilton

  6. […] level performance of high school graduates, which will be better for the economy than a tax that sucks the profit out of doing business in […]

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  11. This TAX HIKE BALLOT INITIATIVE will be DEFEATED in November. Keep Nevada “tax free”… As your Governor I will push for SCHOOL REFORM and take as much UNION POLITICS out of our kids education opportunity (both Teachers Union and Professional Association)

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