Allen Rowe: Rare coin and bullion industry may not have future in Nevada
In a state that’s rich in the history of bullion and the manufacture of money, the future of that legacy may be in danger. Legislation and or taxation are the largest threats to most industries in today’s climate, and our industry is no different. There’s one item on this year’s ballot that will determine if the industry can continue in Nevada, or if it will have to move out: the education initiative tax.
Bullion, like many industries in Nevada, operates on low margins. In fact, many of the larger bullion deals our company does are on the margins of 1 percent or less. In our industry it’s glaringly obvious we cannot absorb a 2 percent loss on a 1 percent profit. The only other option would be to pass along the 2 percent cost to the consumer. Unfortunately, consumers are not locked in to buying from only Nevada companies, nor should they be; but this means nearly every person buying bullion will not be spending money in Nevada.
$1 million in sales sounds like a lot to anybody, just as it should, but in the world of business if you are not selling that much you probably will not be in business long.
If you want a perspective just look at your own household budget. If a person or family makes $30k a year that is $2,500 a month. At a 10 percent profit margin, that means you would have to sell $25k a month or $300k a year. Now take a small one-owner restaurant with four employees and then add rent, utilities, insurances, and other expenses. At $4k a month, a company is operating on low expenses. Then ad the $10k a month for the employees and now it takes $17k a month just to stay afloat and take home $30k for yourself. That translates to $2 million a year in sales. If this initiative passes, that means the owner gets to pay $20k in taxes out of his $30k take for the year.
Now think of your favorite clothing store, grocery store, gas station, restaurant, or department store. Look and see how many employees who have been working in any given month and multiply out this scenario with that store. Nearly every store you visit will be affected by this tax. Most of these businesses will have no choice other than to pass that cost on to the consumer, you.
One important thing to look at is how much this tax is increasing the education budget. In the 2014 budget there was right at $2 billion slated for education in Nevada. This tax is looking at bringing in an estimated $800 million more. That is a 40 plus percent increase. Is our system really 40 percent behind?
Instead of increasing the budget, maybe we should look at other ways to cut expenses. Look at the salary and benefits of Pedro Martinez’s superintendent position in Washoe County. With his position in the news a lot lately it does bring to light how much it costs our state each year. Having a salary and benefit package more than $350k a year begs the question, is there any cuts to be had there or in any other of our administrative positions?
When we look at the potential detriment of this tax initiative to our economy, let’s ask ourselves some tough questions. Do we really want a tax that will drive business and industry from Nevada? If education is so important, should we look at where we can cut salaries and budgets to make it work better for our kids? Are the unions behind this drive really for the benefit of all of us, or just for their own benefit? We all live together in this state and we should be able to look at this problem in a pragmatic way, solving it by doing what is good for every Nevadan. Ours is one small industry here in Nevada, but one that has great ties to what made our state great. Nevada is the silver state; let’s keep it that way and not become the “once was a silver state.”
Allen Rowe is the owner of Northern Nevada Coin in Carson City.