Margin Tax Initiative is not the solution

A Trojan horse could descend upon the Silver State if Nevadans are not savvy enough to figure out the Education Initiative is nothing more than a ruse to levy additional taxes on businesses.

A tax by any other name is still a tax, and a hefty one at that. Be wary of proponents stuffed into a wooden horse saying otherwise.

The Education Initiative — better known for the past six months as the Margin Tax Initiative — proposes to subject every Nevada business that posts a gross revenue exceeding $1 million with a 2 percent margin tax. While proponents of this measure want to squeeze money out of big businesses such as Walmart, Target and others, it will be the thousands of much smaller businesses that struggle to break even or slightly above which will feel the economic pinch.

If passed, the Northern Nevada Development Authority said “Imposing the initiative’s tax on top of the state’s existing Modified Business Tax would create the equivalent of an almost 15 percent state corporate income tax — nearly twice as high as the corporate income tax rate in California.”

Question 3 doesn’t even guarantee the legislature will increase education spending, and even if it passes, education funding could decrease. Nevada, which is facing another deficit going into the 2015 legislative juggernaut in Carson City, could find other projects to fund in order to make up losses. Earlier this year, even the AFL-CIO, which initially supported Question 3, pulled its support for the initiative citing the measure would hurt current employment and curtail job growth.

One by one during last week’s Candidates’ Night in Fallon, the three men and two women running for the Churchill County School Board each said they would not support the Margin Tax Initiative because it would hurt businesses and would lead to job losses. Even a former superintendent said he could not favor the initiative.

Perhaps it would behoove proponents of this measure who live in Clark and Washoe counties to carpool to the rurals to catch some fresh air to cleanse their foggy logic and find out how much Question 3 would hurt businesses that have struggled for the past six years. Talk to the dairy farmers. Talk to the hardware store owners. Talk to the auto dealers. Proponents will learn how Question 3 — if passed — will negatively affect these businesses. In Churchill County, for example, the effect on agriculture – the lifeblood of this area — could be devastating as pointed out by the Nevada Farm Bureau in July:

Eric, Pete and Neal Olsen own and manage a multi-million dollar cow dairy operation that milks 2,000 cows and farms 1,500 acres. In most years, the dairy’s net income does not reflect gross revenue.

Question 3 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,” Eric Olsen said.

The Olsens spent more on taxes in 2013 than they did on equipment. An additional margin tax would drastically increase their already high taxes. The margin tax would have an additional negative effect on dairymen because, unlike small business owners, they cannot raise their prices to accommodate the new tax.

With taxable sales still flat in most of the rural counties, the last thing businesses want is another tax.

What would be the cause and effect? People would lose their jobs; higher prices will undoubtedly be passed to the consumers; and many owners will either shutter their stores or relocate out of state.

Furthermore, during the past six months, a handful of businesses have examined Churchill County for a potential move, but according to both the Churchill Economic Development Authority and Fallon Chamber of Commerce, those plans are on hold until after the Nov. 4 election.

As this newspaper has previously stated, we are not against students, but we feel the legislature must devise a better way to fund education without doing it on the backs of other segments of business. To borrow the cliché, it is not fair to rob Peter to pay Paul.

Although the state has made a steady but small recovery since the Great Recession devastated the Silver State six years ago, the economy is not as strong as it once was; therefore, when Nevadans go to the polls, they must vote a resounding NO to Question 3 and insist the state find a better way to fund education without doing on the backs of others.

Editorials written by the LVN Editorial Board appear on Wednesdays.