Nevada’s Margin Tax Initiative to affect farmers and ranchers
July 4, 2014
As the November election approaches, so does the Education/Margin Tax Initiative on Nevada's ballot, a measure that could greatly affect many of Nevada's agriculturists especially farmers and ranchers in the state.
The Margin Tax Initiative or Question 3 on the upcoming ballot would require any business with gross revenues of more than $1 million to pay a margin tax liability of 2 percent on their entire revenue. The tax revenue would be spent on education in Nevada.
"It is the equivalent of a 14 to 15 percent corporate income tax rate because it's on gross income; it's not on net income," said Karen Griffin, spokesperson for the Coalition to Defeat the Margin Tax Initiative. "This initiative is deeply flawed and costly."
Griffin explained that although the additional tax revenue would supposedly go to education, the initiative provides no guidelines on how funds should be spent, giving the state the authority to divert funds to another cause.
The Coalition said that the tax initiative could raise between $460 million and $800 million annually, resulting in costly taxes for employers with incomes higher than $1 million.
According to Griffin, the additional tax would also make Nevada one of the five highest taxed states in which to operate, leading to a loss of new businesses and jobs. The Coalition estimates 9,000 jobs will be lost if the initiative passes.
Griffin also explains that the new tax would be especially detrimental to employers that have high overhead costs and small profit margins including agriculture operations, grocery stores, restaurants and other small businesses.
"This is a 2 percent tax on gross revenue and in many cases, that's more than farmers are making," Griffin said. "These farms have been in families for generations and now they are looking to have to give up what their families have been working on for years."
Many of Nevada's farmers and ranchers would be affected by this initiative, including agriculturists with generations of hard work in their operations like the Olsen brothers in Churchill County.
"We've been in business since 1915 in Nevada and we've milked cows for over 300 years that we know of," said Eric Olsen, co-owner of Hillside Dairy.
Eric and his brothers, Pete and Neal Olsen, own and manage Hillside Dairy, a multi-million dollar cow dairy operation just outside of Fallon. The dairy, which milked 60 cows in the early 1900s, now milks 2,000 cows and farms 1,500 acres.
Not only does Hillside Dairy provide milk for hundreds of consumers, but it is also the primary source of income for the families of the three brothers and their parents. And, Olsen explained that most years, the dairy's net income does not reflect gross revenue.
"My income is the Mississippi River, but my take-home is a five-gallon bucket of water," Olsen said. "That's how bad it is. It's very, very capital intensive. That's just the way our business is. There are a lot of dollars, but not very many stay here."
Unfortunately for the Olsen brothers and many other agriculturists, the Margin Tax Initiative does not factor in the small profit margin usually associated with agriculture operations.
"It doesn't matter if you make money or not, you are still going to pay," Olsen said.
Olsen and his brothers spent more on taxes than they did on equipment in the last year. An additional margin tax would drastically increase their already high taxes.
In addition, unlike some small business owners, the margin tax would have an additional negative effect on dairymen because they cannot raise their prices to accommodate the new tax.
"We are competing with other dairyman in other states. I can't charge more; the price is set. It is regulated by the government," Olsen said, adding that he must find the additional money somewhere in his operation or risk going out of business if the tax initiative passes.
"They are going to force some people out of business because there just isn't the margin," Olsen said.
Not only will the margin tax initiative force some agriculturists out of business, but it will also discourage agriculturists from growing their operations.
"If you hit $1 million and a penny, you would pay your margin tax not only on the penny but on your entire revenue. So in many cases, it would deter small businesses from growing," Griffin said.
Due to the Margin Tax Initiative's costly effect on Nevada's farmers and ranchers, the Nevada Farm Bureau Federation opposes the measure and has joined the Coalition to Defeat the Margin Tax Initiative.
"This tax would hurt our farmers and ranchers' livelihoods and damage the agriculture industry in our state," says Hank Combs, president of the Nevada Farm Bureau Federation. "We need all Farm Bureau members to vote against Question 3 and encourage others to do the same.
The Nevada Farm Bureau and the Coalition to Defeat the Margin Tax Initiative encourage all members to educate others about the harsh consequences of the Margin Tax Initiative for agriculturists and other businesses in the state. Members can visit StopTheMarginTax.com to join the coalition and to receive more information about how they can oppose this measure.