Every time someone kicks over another margin tax rock, a monster comes crawling out.
We’ve already learned from previous studies and analyses that The Education Initiative, or margin tax, on the November General Election ballot might not raise as much revenue for education as promised by backers, that the money raised by the tax could be diverted from education to other uses as lawmakers have done in the past, that it could destroy as many as 3,600 private-sector jobs, would increase Nevada’s effective corporate income tax to 15 percent (nearly double California’s 8.8 percent rate) and inflate consumer prices for everyone.
The Nevada State Education Association managed to gather enough signatures and survive enough court challenges to put before the voters a 2 percent margin tax on all Nevada businesses that gross more than $1 million a year. Some deductions for expenses are allowed. The union has estimated the tax would bring in $800 million a year in additional funding for K-12 education. It will be Question 3 on the ballot, as noted in this week’s newspaper column, available online at The Ely Times, the Elko Daily Free Press and the Mesquite Local News.
The Coalition to Defeat the Margin Tax Initiative — which is made up of retailers, miners, manufacturers and assorted businesses and business groups — recently published another study of the tax’s effects on Nevadans.
This latest study was conducted by Nevada economist John Restrepo and his RCG Economics firm in collaboration with UNLV economist Alan Schlottmann and others.
Restrepo focused on the impact the tax would have on those who own several businesses, because the tax would treat an owner’s various entities as one for tax purposes.
“For example, one person may own a car wash business and a retail store with annual revenues of $450,000 and $600,000, respectively,” the report explains. “Each company is considered an independent business establishment, but because they share a common owner, these companies would be combined into an affiliated group for the purposes of the Initiative” and thus exceed the $1 million threshold.
When those shared-owners are calculated, 16,288 large and small Nevada businesses would be affected by the tax.
Dan Hart, a spokesman for The Education Initiative, has dismissed businesses qualms about the harms of the tax by saying that 87 percent of Nevada businesses wouldn’t be subject to the margin tax, because their gross receipts are less than $1 million.
He fails to mention that nearly 80 percent of Nevada’s small businesses have no employees whatsoever, while those that would be subject to the tax employ a majority of private-sector workers in Nevada.
This latest study in fact estimates the tax will affect the employers of 608,000 workers, representing 63 percent of private jobs in 2013. “On a per employee basis, the margin tax would be an equivalent of $1,314 per year,” the report concludes.
The study also breaks down the effective tax rate by type of business. When the margin tax is combined with the current modified business tax, the study found a residential home builder would pay a tax rate of 4.7 percent, while a patient care facility would pay 13.8 percent, a construction wholesaler 42.5 percent, some real estate brokers 86.4 percent and family owned restaurants would be taxed in excess of 100 percent.
In light of figures like these, even the Culinary union has come out against the margin tax.
Those are merely the current knowns that can be calculated. The report points out that future bottom line impact is incalculable.
“Unless the long-term impacts of the proposed margin tax to the Nevada economy and its residents are clearly understood, a full analysis of the economic and business ramifications of the tax on the state’s economy is not possible,” the Restrepo report concludes. “The proposed margin tax must be measured and evaluated on its impact to Nevada’s economic growth potential, the state’s economic development efforts, and last but not least, on future business investment. Anything short of this lays the groundwork for a potentially bad public policy that would negatively affect the state’s economic future and the lives of its residents.”
The Nevada Taxpayers Association has warned that many businesses are already struggling to survive the recession and “this tax may prove to be the proverbial straw that breaks the camel’s back.”
Anti-tax coalition spokesman Karen Griffin says that “many businesses that sell goods and services in Nevada would pass on their increased costs from the tax to consumers, increasing the costs we pay for food, clothing, health care, electricity, phone bills, and other products and services.”
There is no guarantee that increased spending on education would improve education. In the past 40 years, Nevada has increased inflation-adjusted education spending 100 percent, while SAT scores have fallen.
Just think how much SAT scores would rise if we slashed education spending.
That makes as much sense as the margin tax.
Something that just arrived in my inbox…
Here are six Conundrums about the United States of America:
1. America is capitalist and greedy – yet half of the population is
2. Half of the population is subsidized – yet they think they are victims.
3. They think they are victims – yet their representatives run the
4. Their representatives run the government – yet the poor keep getting
5. The poor keep getting poorer – yet they have things that people in
other countries only dream about.
6. They have things that people in other countries only dream about – yet
they want America to be more like those other countries.
Makes you wonder who is doing the math.
“They have things that people in other countries only dream about – yet
they want America to be more like those other countries.” By “those other countries, I wouldn’t think you’re referring to 3rd world nations, but other OECD countries. Let’s see how we stack up:
We rank 34th in the world for life expectancy and infant mortality, 46th in degree of freedom for our citizens, 2nd in the incarceration rate of our citizens, and 33rd in suicide rate. Our students score below the OECD average in reading and science while coming in dead last in math. We’re #3 in per capita GDP, but unless you’re in the 1%, who account for 40% of our riches, it won’t do you any good. We are #1 in defense spending though.
I’m not so sure that being like those other countries that outrank us in so many ways is such a bad idea.
Rin, you’re the poster child for “Useful Idiot”.
Nice Anti-American post.
And for God’s sake, don’t look behind the curtain!
Calling my post Anti-American rings hollow coming from one who vilifies so much of what our country does and has nothing but undisguised hate for so many of our leaders and the voters that elected them.
I love my country and will stand by it as well as stand up for it. Loving your country though, should not strike you blind. Do you dispute any of the facts I presented? Do they not concern you? Complacency may sound like loving your country to you, but I prefer to strive for further improvement. One must recognize flaws before they can be corrected.
“hate for our leaders” ? You mean like Barry Soetoro and Harry Greid? Let’s check your cited references, shall we?
There are 45 countries in the world that those citizens enjoy more freedom than we do? 45, Rin? When you read some study that says that, doesn’t something inside you say “wait a minute. That can’t possibly be true!”??
How about that suicide rate? Does this say anything about your proposed Utopia?
And that per capita GDP. Yeh. Why would you want to believe anything like that? Our country is so bad that 30 million illegal aliens have sneaked in to live here! Maybe we could end this drain on our sovereignty by telling them of the 45 other countries that have more freedom than we do? With our $4 Trillion/yr budget, we could fly ’em all First Class!
Then we can see if those other countries that outrank us in SO many ways are all they’re cracked up to be, eh?
Where in the Constitution does it give the federal government the power to fight Ebola outbreaks?
“The United States shall guarantee to every State in this Union a Republican Form of Government, and shall protect each of them against Invasion …”
Oh, here’s something else from the same e-mail…
1. We are advised to NOT judge ALL Muslims by the actions of a few
lunatics, but we are encouraged to judge ALL gun owners by the actions of a
Funny how that works.
2. Seems we constantly hear about how Social Security is going to run out
of money. But we never hear about welfare or food stamps running out of
money? What’s interesting is the first group “worked for” their money, but
the second didn’t.
Think about it…..and last but not least,
3. Why are we cutting benefits for our veterans, no pay raises for our
military and cutting our army to a level lower than before WWII, but we are
not stopping the payments or benefits to illegal aliens.
Am I the only one missing something?
So you can’t find anyone to dispute my sources, unless you lump assisted suicide in with unassisted suicide. Pretty lame, Athos (I do wonder though, do you guardians of individual freedom support assisted suicide or not?). We have lots of illegal immigrants because so many people from 3rd world countries can walk across our border. Hardly proof that we are the best in the world at anything. Try harder Athos. I’m sure we’re better than that!
[…] the license fees would be tied to gross receipts. This means the governor’s plan has the same business stifling flaws that he and others decried so convincingly about the margin […]