Information on the deleterious affects of the proposed 2 percent margin tax on November’s ballot keep trickling out.
Atop a previous report on how the tax would make Nevada’s effective corporation tax rate nearly double California’s comes a study that says the tax could cost the state nearly 9,000 private sector jobs.
The analysis by economist Jeremy Aguero of Applied Analysis, a Las Vegas-based fiscal and policy research firm, for the Coalition to Defeat the Margin Tax Initiative, concluded that sucking $700 million in taxes from the private sector would translate into about 5,800 private jobs lost directly as a result and a total of nearly 9,000 private jobs when the indirect and induced factors are added in. This would cut the state’s private payroll by more than $400 million a year.
Of course, 9,000 jobs lost would be hardly a ripple, since Nevada already has 120,000 unemployed, not counting those who have given up looking for work. But if it is your job lost, it would be pretty significant to you.
The Education Initiative will be Question No. 3 on the November statewide ballot. It calls for a 2 percent margin tax on all Nevada businesses that gross more than $1 million a year. Its sponsor, the Nevada State Education Association, has claimed it would raise $800 million a year for K-12 education. Proceeds from the tax would be placed in the distributive school account, but there is no language in the ballot measure prohibiting lawmakers from extracting a like amount or more and spending it on other things.
Aguero did note in his study that the loss of private jobs could be offset by public jobs if the tax money is used to hire additional teachers and staff.
The reports says “there are plausible scenarios where margin tax funds are not used to hire more teachers, but rather, are used to increase wages and salaries for existing teachers, administrators and support staff; to extend retirement or health care benefits to state workers; or to pay down the state’s unfunded pension and post-retirement health care liabilities. Similarly, there is also the possibility that upon passage of the Initiative that the Nevada State Legislature will allow one or more of temporary state taxes to sunset, including without limitation, the 0.35 percent Local School Support Tax currently deposited into the distributive school account.”
Also, in addition to killing current jobs, Aguero said the tax would chill economic growth and prevent the creation of future jobs:
“While net job losses may be somewhat modest, new job formation would potentially be far more significantly affected. Economic development and diversification have clearly played a critical role in Nevada’s economic recovery and are considered essential to the state’s long-term economic viability. While evaluating the impact on new investment and business relocation in beyond the scope of this preliminary analysis, it should not be ignored. Neither should the reality that even under the best possible outcome — whereby the tax increase does actually lead to substantial improvements in educational attainment — there will be a transitional period in which Nevada has both a higher-than-average business tax rate and a low performing public school system. It is hard to imagine a climate less conducive to economic growth.”