Newspaper column: Margins tax may come up short on revenues

When the Nevada State Education Association teachers’ union placed a 2 percent margins tax on businesses on the November 2014 ballot, the union estimated the tax would bring in $800 million a year in additional funding for K-12 education.

Business community leaders say that number is a pipe dream, as reported in this week’s newspaper column, available online at The Ely Times and the Elko Daily Free Press.

“In this law they are saying you get to deduct your direct cost against this income to compute the tax. And it gives you a couple of alternative ways of computing it. If you don’t want to go through the trouble to figure out what your direct cost is, you can elect to use a default of 30 percent,” says Kelly Bullis, who operates a certified public accounting firm in Carson City. “Now for most businesses I know that is really low. That by the way is where I think the teachers made their assumption about how much money they’re going to make. They think everybody has less direct cost than 30 percent, so they’re all going to choose the 30 percent by default. Reality is: I think you’ll see in most businesses their direct cost is 50, 60, 70 percent of their gross income.”

Bullis said the union and its advisers simply don’t understand business. He gave an example of a gasoline station. If gasoline costs $4 a gallon, the direct cost to the station owner is probably $3.95. A service station might sell $3 million in gasoline but would be able to deduct most of that as direct cost of goods sold.

Ray Bacon, executive director of the Nevada Manufacturers Association, recalls that when an NSEA expert testified before a legislative committee that the tax would generate about $800 million a year, Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, said accountants had told her the tax would not generate so much money and asked the expert to show her their calculations as to how they arrived at that number.

“The last time I knew, she still had not seen them,” Bacon said, “which means they don’t have a clue. It’s a wild ass guess.”

A coalition of business associations will be raising money to put on an education campaign. That should start by the end of November.

Read the entire column at Ely or Elko website.

Apparently when questioned on Nevada NewsMakers by Sam Shad, even Ruben Murillo, president of the Nevada State Education Association, doesn’t know how much the margins tax will bring in.

 

Last ditch efforts being made to scuttle NVision and its huge power bills

Never let it be said that the Nevada Manufacturers Association Executive Director Ray Bacon is ambiguous when it comes to Nevada Energy’s 20-year plan, otherwise known as Senate Bill 123 or NVision: “In our view it looked like a open check book for Rape Pillage and Plunder at ratepayer expense in the name of closing coal fired generation and doing more green energy.”

In an email sent out today he calls on association members, friends and other manufacturers who are not members to take action and to oppose the bill as well as calling on business friends to recruit them to the cause, too.

Bacon noted that power cost can be a huge expense in manufacturing. For some it is 40 percent of total costs.

Under SB123 the power company would close coal-fired plants prematurely and saddle customers with all of the cost of doing so and then build and contract for gas-fired and “green” energy also at the expense of ratepayers

Bacon writes:

“A bill much like this in Colorado was pushed 4 years ago as costing only 2% and it is now looking like it will be at least 21%. Warren Buffet doesn’t buy things which will won’t make money. (See today’s newspaper.) If SB 123 passes as it is now, PUCN will have limited ability to slow Buffet’s capital spending which will assure the 10.5% ROE (rate of return on equity) that all ratepayers will pay.  Independent Power Producers (private investors) making efficient power generation operation of all types will be pushed out. Jobs will be lost and power bills will be higher — much higher.  I think we have the potential to see rate hikes HIGHER than those in Colorado, but that is only my guess.”

NV Energy said rates would increase only 4 percent more than they otherwise would, but PUC staffers have questioned the figures.

One PUC commissioner called the bill “more smoke and mirrors.” Another said it fails to “provide real protection for ratepayers.” And the third one called it a “huge gamble for ratepayers and shareholders.”

PUC staff adviser Anne-Marie Cuneo said the plan would keep rates down in the short-term but would load higher costs at the end. “Your kids will end up paying for electricity that you used nine to 10 years ago, with interest,” Cuneo said.

The bill has already passed the state Senate unanimously and is likely to easily pass the Assembly. Gov. Brian Sandoval in a joint press release with Sen. Harry Reid endorsed the bill.

The governor is probably the last feint hope. Interestingly he has a re-election web page posted asking for people’s opinions. If you don’t mind giving his campaign your email, you good give him your thoughts on this at: http://www.briansandoval.com/ideas.

The Review-Journal this week editorially called on the governor to use a pocket veto so the Legislature cannot override.

The session ends Monday.

Or, as they said in “Animal House“:

Otter: Bluto’s right. Psychotic … but absolutely right. We gotta take these bastards. Now we could do it with conventional weapons, but that could take years and cost millions of lives. No, I think we have to go all out. I think that this situation absolutely requires a really futile and stupid gesture be done on somebody’s part!

Bluto: We’re just the guys to do it.

Warning, rough language: