Nevada is known for low taxes. It’s also known for subpar schools and relatively low teacher salaries. The Nevada State Education Association (aka the teachers union) decided that a solution to the problem of subpar schools was a tax on businesses. The NSEA calls it the Education Initiative; opponents call it a fiscal disaster for the state. The initiative will appear on the November ballot and is more commonly known as the Margin Tax.
Interestingly, Jon Ralston, who is probably the leading political commentator here in the Silver State, noted on his blog that both sides (pro and con) paid for a study of its impact. I have a feeling that proponents of the tax aren’t thrilled with what they’re reading. Here are two of the conclusions from the study:
With an effective tax rate approaching 15 percent, Nevada’s effective business tax rate would be materially higher than any other Western state, including, without limitation, California…
The proposed margin tax would take Nevada from below the national average in terms of businesses taxes paid per employee, per $1,000 of personal income and per $1 million of gross state product to among the top five states in the country in each of those categories.
This tax goes into effect at exactly $1 million of gross receipts. It doesn’t take a genius to figure out that this initiative would cause companies to stop growing when their sales neared $1 million.
To date, the only large union in favor of the initiative is the NSEA. I expect that as news of this study spreads that the large casino interests and the unions will either refuse to support the measure or come out against it. While the November election is just over eight months away, this doesn’t look like a good year for Democrats and supporters of new taxes. Given the devastating impact of this proposed new tax, that’s a good thing.