Every other day powerful Nevada politicians ostentatiously holler, through the press, that they’re against taxing “the little guy.”
Obviously, they want to reassure most voters. “Don’t worry,” they say, in effect. “It’s not your forehead in our gun sights. It’s the foreheads of those other folks, those hapless, unlucky business people who employ you. You’ll be okay.”
Unfortunately, this is not merely a lie, but—as Shakespeare would put it—“an odious, damned lie.”
The reason it’s a lie is because businesses, as such, never really pay taxes.
Oh, sure, businesses are often compelled by government to serve as tax collectors. But those taxes come ultimately out of the pockets of business customers and business suppliers.
Customers sometimes end up paying the tax when they insist on a particular good or service where the vendor has few significant competitors nearby. In those circumstances that vendor can sometimes increase his prices to cover a new tax and suffer virtually no loss of trade. But this is rare; customers nearly always can and will find competitors. When they can’t it’s usually because government has legally restricted competition.
So in most cases, a business cannot simply pass the tax on to its customers. Instead, confronted with this new cost burden imposed by the state, a firm must find new ways to economize. In other words: Cut spending.
And where do businesses primarily spend?
Yes, businesses spend elsewhere, but personnel costs are by far the biggest expense for most Nevada firms. On top of that, 60 percent of state businesses are service businesses—where employees are even more central to operations.
This means the largest group of “business suppliers” who will bear the brunt of a gross receipts or “Universal Business” tax will be Nevada workers. Hundreds of thousands of Silver State residents—who provide companies with the countless skills and abilities that allow Nevada businesses, and especially service businesses, to function and compete—will pay the real costs if these reckless tax-hikes become law.
As Doug French recently pointed out, the hit on Nevada workers will be silent: “Some employees will be moved to part-time, others will lose benefits, and the least productive employees will be fired.”
It’s important to understand that even if business people would prefer to pay any taxes themselves and protect their employees from the new cost-pressures levied by the state’s political class on the enterprise, they can’t, ultimately. Businesses, by definition, are profit-making enterprises. Like human beings generally, enterprises are viable only so long as they can adapt rationally to the circumstances they face and earn more than they spend. If a business owner chooses to turn his or her firm into a charitable philanthropy and eat costs, it can be done—but not for long.
Some members of the Nevada Legislature don’t want to understand this. In mid-April the Las Vegas Review-Journal reported on a hearing where Assemblyman David Goldwater “repeated his view that regardless of whether the Legislature approves a gross receipts tax or a tax on services, business would pass the tax onto the public.
“That produced a sharp response from Assemblywoman Peggy Pierce, D-Las Vegas,” wrote the Review-Journal. “‘It is entirely possible to have lower profit margins,’ she said. ‘Taxes do not have to be passed onto the middle class.’”
What is overlooked here, of course, is that Americans are still free. They might go into business hoping to earn a premium—a profit—for delivering to people the services and goods that people want. But they are not chained to that occupation or enterprise. They can withdraw their time, energy and money and move it wherever they want.
So even when Nevada politicians bawl that business people should subsist on lower premiums, that’s not actually up to the politicians. Any laws attempting to prevent businesspeople from earning optimal market premiums—those comparable to the best that can be earned elsewhere—will only drive entrepreneurs and investors out of Nevada.
Despite their public proclamations of concern about working- and middle-class Nevada families, what our authoritarian politicians are trying to do would destroy Nevada jobs, and damage the livelihoods of multitudes of Silver State families.
Unfortunately, this is a price that a predatory elite in Carson City is hoping to make Nevadans pay. They want a “broad-based business tax” because it would give them a direct, hidden, and probably permanent pipeline right into your pocketbook—one that could be tapped at will.
And for that they will do almost anything.
Steven B. Miller is policy director for the Nevada Policy Research Institute.