CARSON CITY, Nev. (AP) — Businesses that take in more than $1 million annually would be subject to a 2 percent margins tax under an initiative filed Wednesday by a coalition of labor groups seeking to raise money for Nevada's public schools.
The measure brings the issues of taxes and education to the forefront ahead of November elections and the next session of the Nevada Legislature.
"This is a broad-based business tax that makes sense for the state," said Lynn Warne, president of the Nevada State Education Association. "We cannot keep cutting funds to education and not expect our kids to suffer as a result."
Warne estimates the measure would bring in $800 million each year.
But criticism was swift from the Nevada Policy Research Institute, a conservative think-tank based in Las Vegas, saying the tax would stunt business growth.
"This margins tax would be a disaster for Nevadans," said Geoffrey Lawrence, the institute's deputy policy director. "A business margin tax will only further squeeze struggling private firms, dampening their ability to hire and suppressing growth in wages. The pain will be felt by families across Nevada."
Republican Gov. Brian Sandoval has said he's opposed to setting tax policy at the ballot box. In March he announced his budget for the upcoming biennium would include extending $620 million in temporary taxes that would otherwise expire to avoid further cuts to education.
And as if to deflate any tax initiatives, Sandoval said extending the taxes already in place means "there will be no need for tax increases in the next session."
The education tax initiative, also sponsored by the Nevada state AFL-CIO, is modeled after a business tax proposal floated by Democrats during the 2011 session but later abandoned after it failed to win any Republican support.
Danny Thompson, state AFL-CIO secretary-treasurer, has been spearheading the initiative for months, making good on statements he made before the 2011 session that voters would decide tax policy if lawmakers ignored it.
"Without a stable, predicable and consistent funding source politicians will continue to play political games with education funding," Thompson said. "This initiative will put an end to that nonsense."
Under the measure, businesses that take in more than $1 million in gross revenue would be subject to the tax. The 2 percent margins tax would be levied against either 70 percent of total revenue; or total revenue minus the cost of goods sold or compensation paid to owners and employees. It would apply to whichever calculation is less.
Nevada's tax structure is heavily reliant on sales and gambling taxes — sources that are prone to volatile swings based on the economy.
During the 2011 session, representatives of the state's mining and casino industries, often targeted for higher taxes, said they'd welcome a broad-based tax approach. Two separate initiatives to raise taxes on those sectors were filed earlier this year by conservative Las Vegas businessman Monte Miller and later withdrawn.
Under the education initiative, mining firms would be subject to the tax. Gambling revenue would be exempt because casinos already pay state taxes on those earnings, but casinos would have to pay the margin tax on revenue generated from hotel, entertainment and restaurants.
Backers have to clear some big hurdles if they hope to bring it before voters and legal challenges are likely.
Supporters will need to collect more than 73,000 signatures by Nov. 13 to send the proposal to the 2013 Legislature. If lawmakers reject it or fail to act, it would automatically go to voters in 2014.