Margins Tax Supreme Court Ruling
Today, the Nevada Supreme Court ruled that an initiative petition to enact a “margin” tax on business is eligible to move forward. The state legislature now has 40 days from the start of the session next week to pass the proposal. If they do not, it will be on the ballot in 2014 for voters to decide.
The proposal would impose a 2% margin tax on all Nevada business with annual revenues – regardless of profit – of more than $1 million. The question in front of the Supreme Court was not about the merits of the proposed tax. In fact, the Court acknowledged that its job was not to “judge the wisdom” of the initiative. The Court merely decided whether the description of the effect of the initiative petition, which is limited by law to just 200 words, was sufficient to describe the proposal to potential petition signers. In other words, the Court did not examine all of the complexities, administrative burdens and public policies associated with the tax in the full 25-page initiative – of which there are many. It left that examination to the legislature or the ballot process.
Improving the performance of the state’s K-12 educational system and higher education is essential for Nevada’s competitive business climate. However, the proposed margin tax is based on a failed model from the state of Texas. It does not guarantee extra funding for public education. It doesn't even guarantee that K-12 education will be funded at current levels. The issue of K-12 funding in Southern Nevada is not about raising more taxes; it is about the fair distribution of tax revenue. As a community, we should be looking at the current funding formula and modify it so that the children of Clark County can get their fair share.
When the 2013 legislative session begins on Monday, the Chamber will be fighting on behalf of the business community to ensure that this ill-conceived and misleading public policy measure does not cripple our fragile economy and impede new investment. This measure would do exactly the opposite of what is needed to attract more private sector jobs! If passed, it will place the burden of the largest new tax in state history solely and squarely on the shoulders of our business community, which is just now beginning to emerge from the recession and hire again. This tax would derail the progress we are making in job creation and entrepreneurship, the foundation of our economic recovery.
Now more than ever we need you, our members, to assist us in fighting to improve the business climate in Southern Nevada and throughout the state. We will keep you up-to-date on this measure, and ask for your help in making sure that we exercise the strong voice of our business community and are resoundingly heard at every step.