Taxes & Government Spending

SB252: Sandoval’s job-killing tax

Victor Joecks

At 1 p.m. on Wednesday, March 18, Gov. Brian Sandoval is going to make a presentation before the Senate Taxation Committee on SB252. That’s his bill to implement a Gross-Receipts Business License Tax, which is a modified version of the margin tax.

Sandoval is banking on political theatre, because the substance of the bill stinks. It’s so bad that just four months ago, voters rejected the similar margin-tax ballot measure by a 4-to-1 ratio.

SB252 would have companies determine which of 30 categories they primarily conduct business under and pay anywhere from $400 to $4 million a year based on gross receipts. The Gross-Receipts BLT would increase taxes on every business in the state.

The biggest problem is that the Gross-Receipt BLT is a gross receipts tax. As such, it increases taxes on businesses that are losing money. This would drive struggling businesses out of business and destroy jobs. It would also create tax pyramiding – where the tax is assessed many times on the same product. This encourages companies to consolidate, violating the good taxation principle of neutrality.

As the Tax Foundation has said, “There is no sensible case for gross-receipts taxation.”

Sandoval has stated he’s modeled the gross receipts tax after Texas’ franchise tax, but Texas lawmakers are looking to eliminate that tax. After Texas implemented the margin tax in 2007, roughly 20 percent of small businesses reported that they would have to lay off employees and another one-third reported they would have to leave jobs unfulfilled.

One of Sandoval’s main talking points on the bill is that the tax would be a broad-based business tax and that that’s important, because less than 5 percent of companies currently pay the Modified Business Tax. But it’s Sandoval who keeps proposing to exempt more and more companies from the MBT. In 2013, he bragged that with the exemptions he pushed, nearly three out of four businesses would owe no MBT.

Sandoval’s story keeps changing, but there’s no changing this. SB252 is a complex and unnecessary gross receipts tax.

If you’d like to contact your Senator about this bill, the contact information for every Senator is below.

 

Victor Joecks is Executive Vice President at the Nevada Policy Research Institute, a non-partisan, free market think tank.