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.