Editorial: Teachers’ tax plan eliminates profits for businesses

Still suffering from election fatigue? Too bad. The biggest race of Campaign 2014 is under way in Nevada, less than eight months after last year’s scorched-earth ballot.

The Nevada State Education Association last week launched the campaign to win voter approval for a new business margins tax. The teachers union donated $1 million to the political action committee that will fund the effort.

The business campaign to defeat the tax won’t be far behind. Republican Gov. Brian Sandoval will make opposition to the initiative a lynch pin of his re-election campaign. By November 2014, the two sides will combine to spend many millions of dollars on the issue — perhaps more than the governor’s race itself.

The initiative would create a 2 percent tax on annual business revenue over $1 million. The levy would wipe out the profits of some companies, and even struggling, money-losing businesses would have to pay the tax. To inflict such punishment on companies after five years of economic weakness and nation-leading unemployment would be unconscionable.

The teachers union and its coalition will build their campaign around the fiscal needs of public schools and the demonization of large corporations as tax-dodgers who can afford the burden. But the $1 million threshold for taxable revenue, deductions notwithstanding, will hit small businesses that have much less flexibility in cutting expenses than large corporations do.

While the margins tax would pump piles of money into schools — up to $800 million per year, by the union’s estimates — there would be no accompanying education reforms. Gaining new revenue without reforms was a fundamental, unspoken goal of the initiative. Teachers unions were furious that a few minor education reforms passed the 2011 Legislature — more rigorous teacher evaluations and tenure changes among them — as a trade-off for an extension of temporary tax increases. The unions want no part of policy compromise, and the margins tax is a means to that end.

The state doesn’t need a bigger version of the same education system. It needs more money for schools, yes, but not this much, and not without re-imagining education and giving parents more choices.

Finally, initiative proponents will pooh-pooh business claims of hardship if voters approve the tax. But the burden of the margins tax cannot be considered in isolation. Nevada businesses were hit with an unemployment tax increase this year. ObamaCare, with all its burdens and penalties, takes effect next year. If voters approve the margins tax, it will take effect Jan. 1, 2015, and businesses will be stuck paying both that levy and the state’s payroll tax. During the 2012 campaign, even Democratic lawmakers said there was no way businesses could be expected to pay both the margins tax and the payroll tax. And don’t forget the sizable property tax bills businesses pay. It is all these liabilities together that will kill jobs. For a lot of companies, the margins tax would be a back-breaker.

Do we rain money down on public schools with no additional accountability at the expense of economic growth and job creation? The answer is a resounding no, and voters should say as much next year.