Wednesday, June 6, 2012 | 12:44 p.m.
The Nevada teachers union filed a business tax initiative today that would raise $800 million a year — an outgrowth of the frustration with the failure of the legislative process to increase funding for state government and schools.
If successful, the petition would create the state’s first tax on business income.
“The Education Initiative,” which is supported by the Nevada State Education Association and AFL-CIO, the state’s largest labor umbrella group, would tax businesses generating more than $1 million in annual revenue.
“Funding for education is inadequate,” said Lynn Warne, president of the Nevada State Education Association, after filing the initiative. “This tax is broad-based and fair.”
The tax, based on a failed Democratic proposal in 2011 and the so-called Texas “margins tax,” would be 2 percent on either 70 percent of a business’ total revenue; or total revenue minus the cost of goods sold or the amount of compensation paid to owners and employees, whichever is less.
Revenue from gambling, which is already subject to a special tax, would be exempt. Mining, which is also subject to a special tax, would not be exempt.
The money would be earmarked for K-12 education, but Warne acknowledged that money could be moved around in the budget to fund other things, such as public safety, health care and higher education.
The margins tax would end Nevada’s status as one of only three states without some type of corporate income tax, a coveted distinction for conservatives in Nevada.
“This margins tax would be a disaster for Nevadans,” wrote Geoffrey Lawrence, deputy public policy director of the Nevada Policy Research Institute. “A business margin tax will only further squeeze struggling private firms, dampening their ability to hire and suppressing growth in wages. This pain will be felt by families across Nevada.”
Warne said she does not believe this would hurt job growth or creation, arguing the tax targets businesses with more than $1 million in net revenue, or those “who are not paying their fair share.”
Warne said the tax is a good alternative to the state’s payroll tax — which the group would work with the Legislature to repeal because “we believe it hurts businesses' ability to hire.”
A repeal of the payroll tax could not be included in the initiative because it would violate the state law requiring initiatives to adhere to a single subject.
The modified business tax, as the payroll tax is called, generates about $370 million a year.
The coalition will have to collect more than 72,000 signatures by November to qualify the initiative. Warne said the union has money for signature gathering.
If successful, it would go to the Legislature in 2013, where lawmakers would have 40 days to pass it, reject it or put an alternative on the ballot. If it’s not passed, it would go to voters in 2014.
The tax would require a two-thirds majority of lawmakers to pass, making it almost certain to be rejected in Carson City. If it goes to the ballot, where it requires a simple majority to pass, the tax would begin to accrue Jan. 1, 2015, and be due Jan. 31, 2016.
The tax initiative has been discussed since the waning days of the 2011 Legislative session, more than a year ago. But a broad coalition of labor, gaming, mining and large business groups never came together.
Warne said she is talking with business groups in an attempt to gain support for the measure.