Sandoval lashes out at criticism of tax without rebutting a single fact

Gov. Brian Sandoval engaged in the lowest of political treachery and deception, launching into an ad hominem attack on the Tax Foundation’s analysis of his business license fee (BLF) based on graduated gross receipts.

Sandoval said of the study commissioned by the Las Vegas Metro Chamber of Commerce:

“The report issued today by the Las Vegas Metro Chamber of Commerce’s Tax Foundation is utterly irresponsible, intellectually dishonest and built upon erroneous assumptions. I know I am not alone in expressing my disappointment in the Chamber’s judgment especially for an organization that repeatedly claims to want to help move Nevada forward. Moreover, this act sits in direct contradiction to what the Chamber’s leaders have expressed to me on several occasions privately in my office. The only good to come from this stunt is that for those of us who are working in good faith to solve Nevada’s education challenges, it removes all doubt about where the Las Vegas Chamber stands. I believe the Chamber’s leaders have done their membership a terrible disservice and have harmed the credibility of an organization that purports to stand for education.”

The statement is all bluster and void of facts. He names not a single erroneous assumption. He makes no cogent argument, instead resorting to salacious name calling.

On the other hand the Tax Foundation study was dripping with facts and figures.

Gov. Brian Sandoval (Reno Gazette-Journal photo)

It is Sandoval who is probably engaging in erroneous assumptions. Both the Tax Foundation and the Nevada Registered Agent Association both say Sandoval’s estimation that the BLF will eventually net $250 million a year in revenue is wildly inflated. The agents say it is overstated by $65 million a year and the Foundation says it may be as much as $100 million. Both say the governor overstates how many will pay the tax.

The Foundation notes the governor projects a growth in the number of business licenses from the present 308,000 to 340,000.

The Foundation cites the agents’ study that estimated a net drop of 124,000 registered businesses in the state and a 55 percent reduction in new filings.

Of course, the spineless Chamber immediately disavowed any knowledge of the study and apologized to the governor for the “tone and tenor” of the study.

The Foundation called the tax a “complex, arbitrary tax that will do long-term harm to Nevada’s economic growth.”

“It will be Nevada’s most complex tax for both taxpayers and tax administrators, with a multi-step method of rate calculation bordering on arbitrary, 67 rates plus cliffs and phase-ins for each one, and unclear guidance for multi-industry and interstate companies,” the study said. “It is also decidedly non-neutral, with stated tax rates deliberately varying widely by industry such that it exacerbates tax pyramiding and likely violates federal prohibitions against discriminatory taxation.”

It also violates the state Constitution’s dictate that taxes be uniform and equal.

To illustrate the unfairness of the tax, the Foundation quotes the Guinn Center as saying: “Under the revised Business License Fee structure, publishing, software, and data processing were grouped into one category and taxed at a rate of 0.276 percent, the fifth highest rate. However, the profitability rate for those industries varies significantly: publishing (12.81 percent), software (4.19 percent), and data processing (0.80 percent).”

That is downright arbitrary and capricious, as well as utterly irresponsible, intellectually dishonest and built upon erroneous assumptions.

In an email responding to the governor’s ad hominem attack, the Tax Foundation listed key facts:

  • The proposal would convert the existing flat $200 Business License Fee into a tiered system of 67 revenue ranges for each of 27 industry categories. Additionally, foreign filers and non-employer businesses would pay a flat fee of $400, bringing the total to 29 categories of filers and 1,811 possible flat-dollar-amount tax liabilities.
  • The proposal is targeted to generate $250 million per year once fully implemented and is projected to raise $438 million over the first biennium. However, these revenue estimates may be overstated by hundreds of millions of dollars.
  • While attempting to mitigate the inherent flaws of gross receipts taxes, the designers of the BLF created a complex tax structure that violates the principles of simplicity and neutrality. The proposal requires significant additional administration costs and compliance burdens, and a quick implementation invites disaster.
  • BLF rates are arbitrarily calculated using Texas data from a single year, despite the high likelihood that such data is not representative of Nevada’s economy. BLF rates do not correlate with profitability, resulting in punitive taxes for some and taxation of unprofitable firms.
  • The BLF designers incorporated revenue cliffs that result in absurdly high marginal tax rates, reaching as high as 13 million percent. BLF designers concede pyramiding will be a problem, violating the principle of neutrality.
  • BLF industry categories were arbitrarily selected and will result in tax arbitrage and economic distortions, as seen in states with similar taxes.
  • Texas and Washington, while providing the model for the Nevada BLF proposal, are considering proposals to repeal their analogous taxes.
  • The BLF proposal violates the principle of transparency by mislabeling an obvious tax.
  • The BLF as proposed likely violates the interstate commerce clause and federal law.
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3 comments on “Sandoval lashes out at criticism of tax without rebutting a single fact

  1. Barbara says:

    Hopefully people will remember Sandoval’s poor leadership as Gov. and not vote for him when he runs for Senate.

  2. […] problem is that the Chamber’s think tank came out with a study blasting the governor’s business license fee on Thursday and the governor immediately […]

  3. Winston Smith says:

    As a politician, when you can’t respond cogently, just pretend to be Taz…

    http://vignette2.wikia.nocookie.net/looneytunes/images/2/2c/Taz.GIF/revision/latest?cb=20130824012952

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