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January 23, 2018

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Here’s why Nevada voters may eagerly support a 2 percent business tax next year


Mona Shield Payne

Eighth-grade students Tyriu Miller and Justin Bravo, right, read along as Clark County School District Trustee Deanna Wright teaches them about the Holocaust during Teach For America Week at Dell H. Robison Middle School in Las Vegas Tuesday, April 30, 2013.

Holiday Shopping

Jen Toone smiles as she carries an XBOX 360 as hundreds begin their shopping Thursday, Nov. 28, 2013 at Kohl's in American Fork,  Utah,  for an early Black Friday opening. Launch slideshow »

Here’s one for the holiday shoppers in Nevada whisking in and out of retail stores.

No state business tax means you should be getting better prices here than in other states, right?

After all, if businesses pay fewer taxes in Nevada than in other states, the savings ought to trickle down to Nevada consumers. It’s simple logic: Hey, the state's giving you a break, so how about cutting us a break?

But just the opposite is happening, says Guy Hobbs, founder of Hobbs, Ong & Associates, Inc., a Las Vegas-based financial advisory firm. Nevadans are effectively subsidizing other states’ consumers because people living in high-tax states are paying about the same price as people do in Nevada when they shop at national retailers, Hobbs said.

And the complaint doesn’t stop there. Nevadans also are paying with a diminished quality of life that is rubbed in our noses with every new ranking that compares Nevada dismally with the other states.

Some political activists say it’s time for large companies to pay more to do business in Nevada and are advocating a tax measure to wring money out of companies for Nevada’s education system.

That effort comes in the form of a proposed 2 percent business margins tax, which teachers and others want voters to approve in the Nov. 4 election.

“We’re getting taken to the cleaners by big businesses in this state, and that has to stop,” said Dan Hart, consultant for the Nevada State Education Association, the state teachers’ union that is advocating for the tax. “They don’t want to pay their fair share for access to our labor force and market.”

The Education Initiative, as it’s called, would impose a 2 percent tax on businesses that gross more than $1 million a year after deductions for payroll and cost of goods.

It would be Nevada’s first business tax on all of the state’s businesses.

Proponents are painting the upcoming campaign as a battle between greedy corporations and working families who would benefit from a better-funded education system.

“Major corporations profit from Nevada, then ship those profits out of state,” says a banner on The Education Initiative website. “Tell corporations to help fund our schools.”

Instead, by taxing them, Nevadans can improve the education system, increase earnings for everybody and boost the economy, the website says.

Retailers cringe at the suggestion that Nevadans are getting burned at the cash register because of the businesses’ tax benefits.

The retail price of goods is set by factors more complicated than simply whether a business is taxed by a state, says Bryan Wachter, director of government affairs for the Retail Association of Nevada, a trade group representing retailers in Nevada.

In fact, there are some businesses that may be unable to raise prices if they are subjected to a 2 percent tax on their revenue, because they would no longer be competitive with national retailers who benefit from the economy of scale.

• • •

This isn’t the first time Nevada has debated a business tax increase. This also isn’t the first time proponents of a tax increase have used the argument that large businesses aren’t passing along savings that result from low taxes to Nevada consumers.

Nevada has traditionally sold itself as a low-tax state. In the 1940s, signs at the state line welcomed people to a state that has “no income tax, no sales tax, no inheritance tax, no corporation tax and no gift tax.”

At issue is whether a low-tax environment brings more benefits to Nevada than drawbacks, Hobbs says.

Regions with higher taxes sometimes attract and retain businesses despite higher taxes because their employees enjoy better schools, infrastructure, social programs, public safety and sound municipal governments that invest in parks and other amenities. “There’s a whole raft of things that the (tax) money can pay for that improves the lives and economic prospects for people who live in those states,” Hart said.

And the other side of the coin? The argument that a business tax will chill efforts to diversify Nevada’s economy.

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