“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. … Speaking out against new benefits is not popular. Hard truths rarely are. … Tax revenues, as we all know, have to come from somewhere, and someone will have to pay. … Spending is so much more enjoyable when you ignore where the money comes from. But we must try to resist the easy temptation to forget the burdens of taxation, even when that burden may fall on someone else.”
— Nevada Gov. Brian Sandoval
Gov. Brian Sandoval didn’t say those words in his Thursday night State of the State address. He made those remarks in March, at the Nevada Taxpayers Association’s annual lunch, in a principled takedown of ballot Question 3.
The 2 percent margins tax was placed on last year’s ballot by the state teachers union, and Sandoval led the Republican charge against the levy. Studies projected it would remove about $750 million per year from the economy and kill thousands of private-sector jobs.
“The margins tax, if approved, will jeopardize Nevada’s recovery,” Sandoval said March 4 at The Orleans. Too many businesses were still hurting, he said. Too many Nevadans still needed good jobs.
Nevada’s voters responded. They rejected Question 3. In fact, “no” on Question 3 out-polled Sandoval himself, 79 percent to 71 percent, despite the fact that Sandoval faced no serious opposition in his re-election campaign.
Now Sandoval has a different view on taxing business revenue. On Thursday, he sent jaws to the floor across the business community when he proposed a sizable infusion of new tax dollars to bolster public education spending through — wait for it — a modified version of the margins tax he spent all of 2014 attacking.
Sandoval wants to base a new state business license fee on a company’s gross receipts. The new fee would have 30 categories and be assessed on top of the state’s payroll tax. He estimates the new tax will produce about $220 million per year.
That’s about one-third of what the margins tax would have brought in for the state. So doesn’t it stand to reason that Sandoval’s tax is one-third as bad? That it will kill one-third as many jobs? That it will cause one-third as much economic harm?
“I know I am asking a lot from the business community,” Sandoval said Thursday. “But I have explored every option and find this to be the broadest, least complicated and fairest solution.”
Broadest? Businesses already pay the payroll tax. And because Sandoval has proposed making the higher, temporary, “sunset” payroll tax increase permanent, instead of letting it expire June 30, businesses will be popped twice.
The “temporary” higher sales and motor vehicle tax rates would be made permanent under his budget, as well. The governor’s plan also boosts the state’s cigarette tax rate by 40 cents per pack. All those levies are regressive. Taxes would go up for slot route operators, and the mining industry would join banks in paying the state’s highest payroll tax rate. Combined, this package will boost state revenues by about $1.15 billion, for a two-year, $7.3 billion general fund that greatly increases education spending.
The governor’s plan cannot be called tax reform. It does absolutely nothing to broaden Nevada’s narrow tax base. It increases existing, targeted taxes, creates a new one on already-taxed entities and leaves vast areas of state commerce untaxed. It’s a tax increase, and nothing more. And the burden of that increase is disproportionately placed on employers.
Sandoval was attorney general in 2003, when Gov. Kenny Guinn’s proposed gross receipts tax was dismantled by lawmakers. Voters rejected the margins tax in November, at Sandoval’s urging. And now Sandoval is proposing a modified gross receipts tax as the best way to move the state forward?
He’s ignoring his own advice. He is giving in to “the easy temptation to forget the burdens of taxation.”
There has to be another way.
Glenn Cook (email@example.com) is the Las Vegas Review-Journal’s senior editorial writer. Follow him on Twitter: @Glenn_CookNV.