This November, Nevada voters will have the ability to reject a teachers union-led effort to impose a new margin tax on all Nevada businesses that gross more than $1 million per year. Commonly referred to as the “Education Initiative,” Question 3 on the ballot this year would impose a 2 percent margin tax on all businesses in Nevada. If approved, Nevada would jump “from a state with one of the lowest business tax burdens in the nation into the top five.” 

Thomas Mitchell from Watchdog Nevada points out that, “When added to the current Modified Business Tax, which is a 1 percent tax on businesses’ payrolls, the 2 percent tax on gross receipts, because of limited deductions for expenses, would give Nevada an effective corporate income tax rate on profits of 15 percent — the highest in the West and nearly double California’s business tax rate of 8.8 percent.”

According to an analysis conducted by Jeremy Aguero of Applied Analysis, “nearly every business analyzed bore significantly higher business tax liability under the proposed margin tax.” The initiative would increase the average tax rate on Nevada businesses by 450 percent and would be four times larger than the Texas Franchise Tax, a commonly referred to example for precedent on this type of business tax. The analysis concludes that while a majority of Nevada businesses would not pay the tax because they do not meet the $1 million gross revenue threshold, businesses who employ a majority of Nevada’s workers and account for most of the state’s economic activity would bear increased liability. 

This will increase the cost of countless goods and services provided by Nevada businesses, including groceries, electricity, and health care. It would do this without any guaranteed improvement in the quality of education provided to Nevada public school students. 

That’s because while money generated by the measure will be put into the “Distributive School Account,” nothing would prevent the legislature from taking general fund education dollars and spending it on other budget priorities. The simple appropriations process could result in less education dollars, according to a 2012 District Court judgment, even after imposing hundreds of millions of dollars in higher taxes for an “Education Initiative.” 

And of course, increasing money “for education” is in no way a guarantee that anyone’s quality of education or learning will actually increase as well.

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