Governor Brian Sandoval Flip-Flops on Nevada Margins Tax

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Posted by Paul Blair on Friday, January 23rd, 2015, 4:21 PM PERMALINK


In his 2015 State of the State Address, Gov. Brian Sandoval (R-Nev.) called for the largest tax increase in Nevada history. At more than $1 billion over the next two years, Sandoval’s tax hike will fuel massive budget growth, increasing the budget from $6.6 billion to $7.3 billion. This is a significant departure from his rhetoric over last year’s massive margins tax hike ballot initiative.  

Last year, Sandoval had this to say: “All things being equal, we prefer to keep more of our earnings. That fact makes new taxes a tough sell. As such, the proponents of new taxes, like any good marketer, ignore what’s unpopular about the product. Instead, they point to the alleged benefits of the tax, rarely mentioning the costs.”

“The margins tax, if approved, will jeopardize Nevada’s recovery.”

His 2015 State of the State Address: “Improving our public education system must therefore begin with modernization, and modernization requires investment. 

…I am therefore proposing a broad-based solution that asks Nevada business to invest in our education system. 

…It's time we are honest with ourselves — these revenues are now a part of our comprehensive budget. I know this approach will cause debate. You will all find that there is no perfect solution."

Governor Sandoval’s 2015 budget includes the following tax increases:

  • Cigarette tax hike from 80 cents to $1.20 per pack
  • Slot machine tax hike
  • Mining industry payroll tax hike to 2 percent, above the traditional 1.17%
  • Business license tax imposed based on gross revenue; the margins tax
  • Making permanent $580 million in “temporary” tax hikes including:
    • Payroll taxes
      • A .35% sales tax hike
      • A $100 increase in the business license tax

 

We rate this a full flip-flop.

Why was Sandoval opposed to tax increases in 2014 and in 2015 pushing the largest tax hike in state history? Was it because 2014 was a gubernatorial and legislative election year? Why is he doing what he accused proponents of tax increases in 2014 of doing, focusing on the alleged benefits, instead of the costs to businesses?

$882 million of Sandoval’s proposed spending increases are aimed at education, the same supposed target of the “Education Initiative” tax hike that voters rejected by a margin of 79%-21% last year.

Businesses and labor unions opposed the tax and for good reason. Gross receipts taxes hit thousands of small businesses and major employers without regard for their ability to pay, as the taxes are based on revenue, not profits. 

That’s precisely why only five states have gross receipts-esque taxes and one of them, Texas, may eliminate it this year. These taxes are extremely damaging to the economy. By creating complicated tax calculations, the administrative and compliance costs are massive. The governor’s proposal includes 30 such categories.

Republicans shouldn’t be in the business of complicating the tax code in order to placate teachers unions. This is especially true in the aftermath of a crushing defeat of the Education Initiative and in light of Republicans being swept into power for the first time in over 80 years. 

Nevadans should contact Governor Brian Sandoval at 775-684-5670 and ask him why he flip-flopped on the massive margins tax. This is a tax hike that Nevadans can’t afford. 

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