Sandoval’s business license scheme is just margin tax lite

First of all, don’t call it a business license fee. It is a tax.

A fee is something you pay to cover the cost of a service. Getting a license requires a fee to cover the cost of the service.

Generating revenue for the general fund to pay for public education is a tax. Pure and simple. As such it will require a two-thirds approval by both houses of the Nevada Legislature.

Gov. Brian Sandoval proposed his business license fee scheme in his State of the State speech and is scheduled to outline it for legislative tax committees this week.

He insists the fee is different from the margin tax rejected by voters in November by four-to-one. The Nevada State Education Association managed to gather enough signatures to have its Nevada Education Initiative go before the voters. The initiative proposed a 2 percent margins tax on all Nevada businesses that gross more than $1 million a year.

Sandoval’s plan doubles the business license fee on all businesses from $200 to $400 and also imposes a tax on gross receipts, but it is less than 1 percent and starts at much lower levels of gross receipts. The law, introduced as Senate Bill 252, is a 130-page behemoth with 27 separate tax tables for different industries. For some industries the tax kicks in at about $125,000 a year and more others it doesn’t apply until nearly $200,000 a year.

While the margin tax allowed businesses to take one of three deductions: A. A straight 30 percent of revenues, leaving the tax due on 70 percent of revenue. B. The cost of goods sold. C. Employee compensation up to $300,000 per employee — Sandoval’s tax has no such deductions, except for gaming revenues.

The margin tax was estimated to hit private industry with $800 million a year in taxes, while Sandoval has said his tax will rake in $250 million. The lowest tax would be $400 and the highest would be $4 million.

Like the margin tax, it pays no heed to whether a business is profitable. It hits the gross receipts no matter the cost of doing business.

According to a fact sheet posted on the governor’s website, there are more than 300,000 businesses that currently pay the licensing fee. The fact sheet insists the license fee is “significantly” different from the margin tax. In fact, it will ding far more businesses than the one pushed by the teachers’ union.

For all its flaws, the margin tax was uniform. Sandoval’s is a contortion. Those 27 different tax tables arguably defy the state constitutional mandate that: “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation …” How can this possibly pass constitutional muster?

According to that fact sheet, the tax rates varies from a low of 0.056 percent for mining to a high of 0.362 percent for rail transportation.

A study conducted for Nevada Policy Research Institute estimated the margin tax would kill 3,600 private sector jobs. Will the Sandoval tax kill only 1,000?

Screen Shot 2015-03-16 at 10.26.35 AM

Introduction to SB252



Tax table for newspapers, magazines, books and other publications.

Tax table for newspapers, magazines, books and other publications.


37 comments on “Sandoval’s business license scheme is just margin tax lite

  1. Bruce Feher says:

    Makes no difference what Governor BS calls it, he’s still picking our pockets! Government is a luxury I can no longer afford!!!!!

  2. nyp says:

    According to today’s report, more than 16 million Americans have gained health insurance coverage since the passage of health reform. That is more than 35% reduction in the number of Americans who do not have affordable, high-quality health insurance for themselves and their families.

  3. 11 million of those were through Medicaid or CHIP. Maybe Obama should just expand Medicaid and cover everybody for free … er, at taxpayers expense and higher deficits for our grandchildren.

  4. nyp says:

    I would be happy to expand Medicaid, which covers the working poor who are too impoverished to afford private healthcare for their families. It is an incredibly cost-effective means of delivering health care. Still, I’m happy enough with the private-enterprise system that forms the backbone of healthcare reform.

  5. nyp says:

    Actually, Mr. Mitchell, I would be interested in knowing the source of the data you cite. It does not sound right to me, given that more than 11 million Americans have enrolled in private health plans through and the other new marketplaces.

  6. With big spending, big government Republicans like Sandoval, Roberson, & Hambrick at the helms…the level of frustration for conservatives is maddening! And what’s worse…some folks keep talking about Sandoval as a possible Vice Presidential candidate…he’s the antithesis of what is needed to turn this ship around. Good grief…

  7. nyp says:

    thanks for the cite – very helpful. In reality, the numbers don’t really line up, as a lot of the expansion in Medicaid and Child Health enrollment has been states that have not expanded their eligibility criteria in line with the Affordable Care Act. Still, Medicaid/CHIP enrollment under healthreform has been significant. I hope it increases!

  8. Rincon says:

    From This week’s Economist ( 3/7-13, p.27): 1/4 of Americans that did not have insurance as Obamacare began are now insured. “America is experiencing its slowest growth in health spending in 5 decades.” The economic downturn is credited with 37-77% of the slowdown.

    “The amount that Medicare spends on each beneficiary has actually declined in real terms, from $12,000 in 2011 to $11,200 in 2014.” Hospital readmissions for Medicare patients have dropped 8% between January, 2012 and December, 2013. The Economist credits Obamacare with these improvements

    Doesn’t sound like Obamacare is bankrupting the country as predicted. Where is the apocalypse you guys were talking about?

  9. nyp says:

    You know, I went to see my doctor earlier this week and I couldn’t find a single federal bureaucrat standing between me an my physician, even though ObamaCare has been the law of the land since 2010. Where were they? Had they gone out for an early lunch?

  10. No…they’re still busy trying to fix their website!

  11. nyp says:

    Well, then those federal bureaucrats must be pretty damn good —
    If you go onto you will see that it works really, really well, and it has done so for more than a year.

    If you need to purchase high quality, affordable private sector health insurance for your family, you should definitely check it out.

  12. Steve says:

    Sure…that’s why Bernie Sanders says there are still 40,000,000 uninsured in the country,

    Because Obamacare is working SOOOOO well.

  13. nyp says:

    You think that reducing the number of uninsured by 35% in two years while reducing the growth in healthcare costs is nothing to celebrate. I happen to disagree.

  14. “A two-page report from the Dept. of Health and Human Services claims the uninsured rate fell from 20.3% to 13.2% since ObamaCare began. …
    “Census data also show that the average uninsured rate from 1999-2007 was 14%.”

    A lot of money spent for so little improvement.

    Read More At Investor’s Business Daily:

  15. Steve says:

    Nyp, you have a problem with Bernie Sanders. He is the person I am quoting.

    I will thank-you to stop assuming pretend opinions for me.

  16. nyp says:

    That’s right, Mr. Mitchell — compare statistical apples with oranges. for example, compare uninsurance rates over an eight-year period with that from a three year period. And play off one statistical measure against another. That way, you can wave away a dramatic 35% drop in the number of uninsured Americans. The same way you wave away evidence of the effects of carbon-generated global warming.

    It is a sort of Baghdad Bob approach to inconvenient truths.

  17. nyp says:

    the last time the rate of uninsurance dropped so dramatically was when Medicare/Medicaid was adopted.

    Then again, Thomas Mitchell wants to abolish those as well.

  18. You think it is OK to compare insured rates to the depth of the recession and joblessness, then credit all improvement to ObamaCare.

  19. nyp says:

    Yes, I do think it is OK to credit ObamaCare for the unprecedented 35% drop in rates of uninsurance since the law was enacted. Among other things, the reduction has been greatest in states that have enthusiastically adopted both aspects of coverage: state-based private insurance marketplaces, and Medicaid expansion for the working poor. Kentucky, for example, was a remarkable 10% drop in a single year. Texas, in contrast, reduced its uninsurance rate by only 3% – from 27% to 24%. Think about it: in Texas almost one in four residents lack decent health insurance.

    I do enjoy, however, the fact that you wish to credit the fantastic increase in coverage rates to the thriving economy that President Obama and the Fed have succeeded in turning around since the depths of the Great Recession!

  20. Rincon says:

    From your article Thomas: “A better comparison would be with the uninsured rate before the recession, not when it hit its peak during the slow recovery. If you do that, you see the recent drop is likely due to the economy, not ObamaCare.” You claim that the recovery is nearly nonexistent, but then present an article claiming that the improvement in health care numbers is because the economy is doing so well. Didn’t you also claim that most of the new jobs were part time or with minimal benefits? Which Thomas Mitchel should I believe?

    You guys can argue the numbers all day, but the bottom line says: No apocalypse as panicky Conservatives predicted.

  21. Steve says:

    Conversely, no huge benefit from the “legacy” legislation Obama pushed so hard.
    Quoting Bernie Sanders again”
    “Despite the modest gains of Obamacare…”
    Coming from a liberal’s liberal, that is hardly glowing praise, huh?

  22. Anonymous says:

    My gratitude for Obamacare is that it overcame 50 years of inertia. Although it’s only slightly better than what came before it, Conservatives were dead wrong in their scare mongering.

  23. Rincon says:

    Oops, it’s me.

  24. Steve says:

    And Liberals are dead wrong on its successes. As Bernie Sanders so vociferously states.

  25. Rincon says:

    People believe the spin of whomever they favor. As I stated, Sanders says the drop in the uninsured is due to the improving economy while you say the economy is hardly improving at all, especially for those who need insurance. It is very unlikely that both are true, but this contradiction is meaningless to you. I consider the Economist to be a far more credible source than Sanders, who you normally wouldn’t trust either – unless he says what you want to hear of course.

  26. Steve says:

    Oh, Sanders simply began saying things Conservatives have been saying for a couple years now.

    Perhaps he “evolved”

  27. […] plan doubles the business license fee on all businesses from $200 to $400 and also imposes a tax on gross receipts. SB252 is a 130-page behemoth with 27 separate tax tables for different industries. For some […]

  28. […] do things in Texas — why else would he propose a business license tax based on gross receipts, a margin tax, just months after the voters rejected the concept at the polls and while Texans are trying to […]

  29. Athos says:

    petey always has the best looking charts! But I fail to understand how anyone can tout an uptick in people getting health insurance when it’s now a federal law? Or is this a prohibition thing? I’m sure fewer people drank when the 18th amendment was passed, but then again, many people made millions (Joe Kennedy, for one! Al Capone for another!)

    One more thing, you fellas can show all the charts and talk all the phony baloney numbers you want, but reality has a way of showing what gullible morons you are, and those idiots (Krugman) you support. You are soooo dumb (how dumb?) that it wouldn’t surprise me to see you touting tulips as the best thing going next to sliced bread!

  30. […] of businesses, only to have, let’s speculate, the governor a couple of months later introduce virtually the same tax, only slightly less onerous, and call it a business license fee based on gross receipts of […]

  31. nyp says:

    I can “tout” a significant decline in the percentage of uninsured American citizens because not having health insurance sucks, and striding towards universal coverage is a great achievement for our country.

    Without adequate health insurance, people end up like Athos — declaring personal bankruptcy after running up big medical bills, and leaving others to hold the bag.

  32. […] editorial also suggested making Sandoval’s margin tax lite — a business license fee based on gross receipts, like the one rejected by the voters in […]

  33. […] four state senators had the gumption today to vote against the governor’s margin tax lite, which taxes businesses based on their gross receipts in the same way as proposal on […]

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