Mom-and-pop business worries about indirect impacts of margin tax
LAS VEGAS — Randy and Kathalynn Thwing may have to pick up their lives and move out of the state they’ve called home since the ‘80s if voters approve the margin tax this November, even though their long-time business wouldn’t be directly subjected to the tax.
The pair owns and operates New Standard Manufacturing, a business that’s been building and selling padlocks in Nevada for over 25 years. Even though they’re one of the small, mom-and-pop businesses supporters of the tax claim will be unaffected, Randy says his business and other companies like them will be hit hard.
“It’s the simplest economics,” Randy said, recognizing that those he does business with will pass on the tax to him, thereby upping his costs of operating in the Silver State. “My landlord is the biggest example. They’re a multi-million-dollar company. They’re going to raise my rent 2 percent.”
If the tax passes, businesses that bring in more than $1 million in revenue in a given year will be forced to pay a 2 percent tax on that revenue — minus certain deductions — regardless of their profitability; even companies that lose money would be forced to pay if they meet the $1 million threshold.
“A small business like mine, that’s not going to pay the tax (directly), what’s my share of the tax going to be?” he wondered. “It’s a trickle-down sort of thing.”
If his rent, services and other costs goes up as those businesses pass on their own increased costs as expected, Randy said he expects he’ll have to raise his prices, which may make his own company non-competitive with other, larger retailers.
“I’m going to have to raise the prices to my customers as soon as I get hit with this,” Randy said. “Every company is going to have to raise their prices.”
Because businesses like New Standard Manufacturing could be hit with price increases in multiple areas as suppliers and service providers pass on the tax, Randy said there is no telling what the final mark-up could be. And, though Question 3 is billed as a tax on business, Nevada residents will end up picking up a large chunk of the tab, he predicted.
While Randy and his wife haven’t yet determined what they will do if the tax passes, he said that staying would mean they would have to look to purchase supplies for their locks out of state to keep their costs down, or, they may have to consider moving to a nearby state that doesn’t have such a tax.
With the recent increase in fuel taxes and spike in unemployment taxes, Randy said it’s already becoming harder to do business in Nevada. The proposed margin tax would add one more hurdle, even for the state’s smallest companies.
“It’s a very tough decision,” Randy admitted. “We’re always looking to see if there’s a better place to locate.”
Chantal Lovell is the deputy communications director at the Nevada Policy Research Institute. For more, visit NPRI.org.