Well, that pretty much makes it unanimous, doesn’t it?
With the AFL-CIO passing a resolution opposing The Education Initiative today, a coalition of business, gambling, mining, Republicans, Democrats, and now, organized labor, have come together to fight the 2 percent margins tax that will appear on the ballot as Question 3.
The ironies are rich: The AFL-CIO resolution directly attacks the work of a fellow union group, the Nevada State Education Association. (So much for union brotherhood!) The man who leads the AFL-CIO, Executive Secretary-Treasurer Danny Thompson, was an early advocate for some kind of business tax, even serving as an officer for the PAC supporting The Education Initiative before having a change of heart about it. And the Nevada Policy Research Institute — the right-wing think tank — issued a statement supporting the AFL-CIO resolution opposing the tax.
Truly, it was a bizarre day in Nevada politics.
First, let’s take a look at the resolution approved by the AFL-CIO.
Whereas: we feel tax policy is best established through the Legislative Process where the effects and implementation can be discussed and the issues resolved; and
Whereas: we understand the need for implementation of tax policy where the effects, the levels of revenues and the utilization of those revenues are clearly defined; and…
This is simply disingenuous, and of all people, Thompson (a former member of the state Assembly and a longtime legislative lobbyist) knows it. The fact is, the legislative process is broken. Every single tax proposal attempted in Carson City in at least the last decade has been thwarted, mostly due to the influence of business lobbyists. And while the resolution is correct that the legislative process is a more efficient vehicle for hammering out taxes, it fails to acknowledge what anyone who has spent any time in Carson City knows full well: It’s virtually impossible for any business tax to make it through the statehouse.
But don’t take my word for it. Listen to an expert, one Danny Thompson of 2011, who said this to the Nevada News Bureau’s Sean Whaley: “We are looking seriously at this process because the legislative process is an impossible one,” said Danny Thompson, executive secretary-treasurer of the Nevada State AFL-CIO. “With the two-thirds requirement in the constitution, what in effect that does – it has the minority control the majority wishes. You cannot solve the problem at the Legislature alone without some help from the people.”
And again, from that same story: “And I think the solution is, do it by the people, that way the Legislature doesn’t have as much wiggle room, and put the money toward education,” he said.
That is exactly why the the teachers union — after years of frustrations in Carson City — elected to circulate an initiative.
More from the resolution:
Whereas: the Education Initiative does not clearly address the effects on all businesses in the State of Nevada; and
Whereas: the Supporters of the Education Initiative have themselves argued different applications of the tax on businesses in the State of Nevada; and
Whereas: the provisions of the Education Initiative do not clearly define how it would be applied to the construction industry; and
Whereas: Supporters of the Education Initiative have advertised the tax as a Net Profits margins tax when it fact is is a Gross Income tax; and…
The fact is, there is some disparity in how the tax will be applied to different businesses, because of the options contained within it. First, it will only apply once a business’s revenue exceeds $1 million. Second, a business may deduct either the cost of goods sold or the cost of labor, at its discretion. There is also a credit for paying the state’s payroll tax. So the bottom line depends on decisions a business makes, which means calculating the impact isn’t simple.
But we knew that already. How? Well, Danny Thompson of 2012 — speaking of a tax plan the union actually favored back then — said it’s impossible to write the perfect initiative: “You can’t make these things perfect. At the end of the day, anyone can challenge anything. If you try to make these things perfect, there’s no such thing.” Amen.
However, we know that 87 percent of Nevada business will pay nothing under The Education Initiative, according to figures calculated by Jeremy Aguero of Applied Analysis. It’s true that the remaining 13 percent of businesses that will pay the tax constitute the bulk of economic activity and employment in Nevada.
The reference in the resolution to the construction industry is not accidental, as it was building trades unions that drove opposition to the tax within the AFL-CIO. And that becomes clear as the resolution continues:
Whereas: many of the signatory contractors of the Building and Construction Trades Council have been operating on their reserves for the last several years as the State of Nevada tries to work its way out of poor economic times; and
Whereas: the Education Initiative does not take into consideration the losses those contractors have endured, but instead burdens them with a tax based on the gross revenues from work they may perform; and
Whereas: many contractors have gone out of business during these poor economic times and the Education Initiative may place a tax burden on the contractors and business which have been surviving on marginal returns forcing them out of business as the tax burden may be higher than the profit margin; may it therefore…
Indeed, this is what contractors say will be the impact of The Education Initiative. Then again, contractors often say that prevailing wage laws are a burden, and we don’t see the AFL-CIO suddenly start opposing them. Many business people say a minimum wage will burden business and cost jobs, but Thompson and the AFL-CIO campaigned to enshrine Nevada’s minimum wage laws in the state’s constitution!
But now, suddenly, we’re taking every business owner at their word that a tax that has yet to pass (under regulations that have yet to be written) will be the death knell for Nevada’s construction contractors. A curious turn indeed.
And does anyone think that if we were talking about a different kind of tax, a net profits tax or a gross receipts tax, or a simple flat business income tax, that contractors (and others) would not be objecting? We know that’s not true, since when those taxes have been proposed, businesses have always objected. If the AFL-CIO is waiting for a business tax that the business community in Nevada will accept willingly and enthusiastically, we’ll still be waiting when the Andromeda galaxy collides with ours, about four billion years from now.
Finally, the denouement:
Be resolved: that the Nevada AFL-CIO and our affiliated Unions oppose the passage of tax policy while it is not clear what the effect on our signatory partners will be; and be it
Further resolved: until the effects of The Education Initiative are clearly defined we oppose the passage and implementation of the measure, and that the Nevada State AFL-CIO will review and re-evaluate its position relative to this measure at the 2014 Constitutional Convention.
Let’s hope nobody’s holding their breath looking for a change of heart.
Thompson, in a statement released after the vote, said the resolution shouldn’t be read as an anti-education funding stance.
“The Nevada State AFL-CIO has always supported funding education to the National Average. There is no equivocation on our support for funding our schools so that our children receive a great education. We are a strong voice and advocate at every level of government for more funding for classrooms, teachers and school buildings.
“The vote in opposition to the Margins Tax Initiative is NOT a vote against education. It is a vote against a flawed initiative that will cost many of our members their jobs and raise the cost of living on Nevadans on a fixed income and on citizens that [sic] are still struggling to make ends meet after years of a terrible recession.
“We are committed to work with the Legislature to reform our tax system so that education, mental health, infrastructure and local government can all be funded appropriately.”
While I have to say I much prefer the Danny Thompson of February 2013 — who told my colleague Jon Ralston that “Without some change [in the Legislature], I support the margins tax. I mean, at the end of the day, we have to do something” — I can understand his change of heart. He may have testified in support of the measure in a March 5, 2013 hearing in Carson City, but as head of a broad coalition of unions, some of which subsequently came out firmly against the tax, he’s in a tough spot.
Sadly, Thompson failed to identify precisely what “reform” to our tax system he’d prefer that would not “cost many of our members their jobs and raise the cost of living of Nevadans on a fixed income and on citizens that [sic] are still struggling to make ends meet after years of a terrible recession.” A sales tax would certainly do all of those things. So would a property tax. Ditto a personal income tax. A corporate income tax of any stripe could be said to have all the consequences Thompson warns of here.
In fact, the same could be said for a net profits tax of 2 percent on business revenue of $500,000 and more, which is a tax that Thompson himself supported in 2012, vowing to qualify it for the ballot even if the teachers union failed to sign on. In fact, when Thompson defended his tax idea in 2012, saying too many of Nevada’s students are failing in large part because of inadequate funding and that a better educated workforce is needed to diversify the state’s economy, his idea was criticized as a “destructive, terribly complex tax” by businessman Monte Miller. They just love to say that, no matter what tax is under discussion, don’t they?
The difference is, now the AFL-CIO and Thompson are saying it, too.
The AFL-CIO found a very unusual ally after its resolution was released, in the form of the Nevada Policy Research Institute, a right-wing think tank that’s opposed to prevailing wage laws, minimum wage laws, and taxes in general. Here’s a bit from NPRI President Andy Matthews:
“NPRI applauds the AFL-CIO for publicly detailing how economically destructive the margin tax would be to Nevada’s still struggling economy. As NPRI has been saying for years and the AFL-CIO resolution notes, the margin tax would impose a large new tax burden on businesses that are losing money, including construction companies, and this new tax would bankrupt businesses throughout the state. We welcome the AFL-CIO’s support in helping the public understand that taxes — taking money out of the private sector — have destructive effects for individual families and the economy as a whole.”
So, how about it, AFL-CIO? Are you willing to hold a joint news conference with NPRI to help the public understand that taxes (and presumably, he means all taxes, not just this one) have destructive effects for individual families and the economy as a whole? Or was the point of your resolution only that this particular tax is bad, but that an unidentified, unspecified other tax might be acceptable, given the fact that Thompson acknowledged in his statement that we need “…more funding for classrooms, teachers and school buildings”?
You know what? For our answer, let’s forget about today’s resolution and rhetoric. Let’s turn to that fateful March 5, 2013 joint hearing before the Assembly Taxation Committee and the Senate Committee on Revenue and Economic Development for our answer. The case was pretty fairly stated by a man by the name of Danny Thompson:
The reason I am embarrassed, and everyone in this room should be, is that we have the lowest graduation rate in the United States. We have the fifth largest school district in the United States in this state. When you think about school districts in New York, California, Illinois, and Florida we have the fifth largest school district, with the lowest graduation rate in the country. We have the largest secondary classroom sizes in United States.
I get a kick out of people saying, “you know, you do not solve a problem by throwing money at it.” We have never thrown money at education ever in this state. We do not fund it to the national average and we are paying the price today.
We are talking about the modified business tax (MBT) and I know people are going to come up here and say “if you make me pay more, then I am going to leave the state.” Well as far as I am concerned they can leave. If $284 per employee is killing you, and only 25 percent of employers pay that, this is a disgrace.
I fully understand that this bill probably will never come to a vote. There are not the votes to pass this bill. There are not the votes to override the Governor’s veto. There is no question in my mind this will go to the people to decide. I think that is where it rightfully belongs, because the Legislature has failed there.