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Teachers union urges lawmakers to pass margins tax

Updated Tuesday, March 5, 2013 | 3 p.m.

Speaking in a packed hearing room, the executive director of the Nevada State Education Association today urged a panel of lawmakers to pass a business tax initiative that has few fans at the Nevada Legislature.

Indeed, Gary Peck took opponents head on in his opening remarks in support of a ballot initiative for which his organization collected more than 150,000 signatures to ensure it made the 2014 ballot should lawmakers decline to pass it into law.

"We hope that there will not be a caucus of no," Peck said. "We hope that we will not hear the same old arguments that have lead this state into a ditch and our K-12 education system into a ditch that is damaging our kids every single day."

Peck and his organization has an uphill battle in Carson City. Legislative leaders from both parties have given the margins tax initiative a cool reception.

The ballot initiative would implement a 2 percent tax on business revenue of more than $1 million a year, generating about $800 million in revenue that would be earmarked for public schools.

Although Democrats proposed the same tax -- at a lower rate -- two years ago, they no longer are championing it at the Legislature.

But the teachers union officials argued both that the margins tax "is the right tax for this state now" and that an underfunded education system is at the heart of the state's economic troubles.

"Changing to a margins tax will help us diversify our revenue base and make it more stable," said Richard Sims, chief economist for the teachers union. "And it would be used to fund education, which is the only way of improving long term diversity and stability in the economy."

The Legislature has 40 days to decide whether to enact the margins tax. If it does not act, the question will be placed on the 2014 ballot for voters to decide.

Advocates for education, the Hispanic community and labor unions came to the support of the measure.

AFL-CIO boss Danny Thompson, a former legislator, chastised lawmakers for never properly funding education.

"The reason I am embarrassed and everyone in this room should be embarrassed is that we have the lowest graduation rate in the United States of America," he said. "I get a kick out of people saying you don't solve a problem by throwing money at it. We have never thrown money at the education in this state. Ever."

In the next breath, however, he acknowledged that the margins tax likely won't pass the Legislature.

"I fully understand this bill probably never will come to a vote," he said. "There are not the votes to pass this bill. There are not the votes to override the veto. There's no question in my mind this will go to the people to decide."

Skeptical lawmakers--both Democrats and Republicans-- peppered the teachers union representatives with questions.

"Even if a business isn't profitable, they would still be subject to (the margins tax)," asked Assemblywoman Irene Bustamante-Adams, the Democratic chairwoman of the Assembly Taxation Committee.

The answer: Yes.

"This is a broad-based tax getting away from profits because profits are so flexible and leads to incentives economist don’t like on tax avoidance," Sims said, arguing a margins tax is more stable.

Lawmakers also questioned why teachers would model a tax after a Texas measure that some are seeking to repeal in the Lonestar State. And they wanted to know how the margins tax would be implemented-- a question even the teachers union representative had a hard time answering.

"I'm trying to understand how the tax would actually wok for a business," Bustamante-Adams asked.

"I'm not sure I can actually answer that question," Sims responded.

Frank Flaherty, a lawyer for the Nevada teachers union, stepped up to the table to give a brief explanation, saying businesses would be taxed on gross revenue generated in Nevada minus the cost of personel or of goods sold.

A phalanx of business lobbyists testified against the tax: banking, small businesses, retailers.

"We agree that this is complex and confusing and largely contradicting," said Bryan Wachter of the Nevada Retailers Association. "And I want to clarify as well that 150,000 people were not qualified on the signatures for this. The secretary of state qualified 107,000 signatures. That's roughly 10 percent of the voting population."

"Businesses may not even be profitable and we’re going to tax them?" said an incredulous Stan Wilmouth, president of Heritage Bank in Reno. "I can’t believe we would even consider for a company that wouldn’t even make money, that is pouring money back in from own personal assets that we would tax that."

But while Democrats may not be in favor of the margins tax, they took pains to point out they'd like more tax revenue for education.

"When you come to the table, don’t come with just, 'No, no, no,'" said Majority Leader William Horne, D-Las Vegas. "I want to hear some options. I want to hear options from everybody, not, 'This is terrible.'"

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