State Question No. 3 is alternatively called the Education Initiative by supporters and the Margin Tax by opponents. Regardless of what the tax is called, it imposes a 2 percent margin tax on businesses with total revenues which exceed $1 million. The funds raised are to fund the operation of public schools, say supporters. Opponents say there is no guarantee on what the legislature will do with the funds as Nevada law lets the legislature divert education funds to other uses.
Nicole Willis-Grimes, a representative of The Coalition to Defeat the Margin Tax Initiative, outlined her groups' opposition to the tax.
Employers would have to pay the tax even if they have no profits and are losing money, said Willis-Grimes. She said because the tax is on gross revenues - and not profits, the tax is essentially a 15 percent business tax, and would make Nevada one of the five highest taxed states for corporations. It is a disincentive for businesses to come to Nevada or to expand, said Willis-Grimes.
Willis-Grimes said there's no guarantee the funds would go for education and there is no plan on how the funds will be spent on education.
Businesses would have to pay up to $750 million annually which the coalition estimates will result in about 9,000 jobs lost.
"There is no free money," said Willis-Grimes. The increased costs on businesses would be passed on to consumers.
"We would likely see an increase on consumer goods, healthcare costs, utilities, rent and so on and so forth," said Willis-Grimes.
There are a lot of gray areas, she said. If the ballot measure passes, Willis-Grimes said the state legislature be allowed to change the measure for three years. The legislative session would not meet until 2019, and that means over $2 billion of tax money collected without a plan and without a guarantee.
Dr. Dave Jensen, superintendent of schools for Humboldt County said in an email that, officially, the district is not taking a stand on the initiative, and that the voters will make the best informed decision regarding this issue.
The Humboldt County Chamber of Commerce is also not officially taking a side on the issue. However, Debbie Stone, executive director of the chamber, said, generally speaking, the chamber is opposed to taxes on gross receipts.
The summary of the ballot measure reads:
This ballot measure proposes to impose a 2-percent margin tax on business entities in Nevada with total revenue in excess of $1,000,000, and it requires that the proceeds of the tax be used to fund the operation of the public schools in this State for kindergarten through grade 12. If this ballot measure is approved by the voters in the 2014 General Election, the applicable margins tax would take effect January 1, 2015.
The ballot measure includes an exemption from the tax for natural persons not engaged in business, passive entities, governmental entities, tax exempt organizations and credit unions authorized to do business in Nevada. Also, any business entities with total revenue of $1 million or less are not subject to margin tax. The tax would apply to all other businesses and organizations with total revenue in excess of $1 million in any taxable year.
The ballot measure would impose the 2 percent tax rate on the entity's taxable margin. Under the ballot measure, a business entity's taxable margin is determined by taking the lesser of:
(i) 70% of the entity's total revenue; or
(ii) the entity's total revenue minus either: (a) the cost of goods sold; or (b) the amount of compensation paid to its owners and employees.
The initiative was filed by the Nevada State Education Association, a teachers' union, and the AFL-CIO; however the AFL-CIO passed a resolution officially opposing the margin tax.
To read the full ballot question, including arguments for and against the tax, visit the Nevada Secretary of State website at nvsos.gov, and click the links for Election Center/Initiatives & Referenda/2014 Petitions.[[In-content Ad]]
