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Truth about the Texas margin tax
It’s not often voters get a trial run before they sign off on a new tax, policy or program.
A lot of the time, the actual impact of a ballot measure isn’t known until it is implemented, or even years later.
Fortunately for Nevada voters, we don’t have to guess or speculate about what will happen if the margin tax passes this November: All we must do is look to Texas.
Texas enacted a margin tax in 2008, becoming the first and only state in the union to implement this particular type of gross-receipts tax. Now, a move is under way to repeal that tax, which hurts small and family-owned businesses, creates a paperwork nightmare for businesses and has for years prevented Texas from reaching its full economic potential.
Since its implementation, the margin tax has forced businesses to scale back production, cut pay and benefits, raise prices, lay off workers and even close their doors. Many companies saw their tax burden increase tenfold under the margin tax, and thousands of Texans have lost jobs as a result of the tax.
After the tax was enacted, Texas’ business-tax-climate rank dropped from seventh to 13th best in the nation, reducing the Lone Star State’s competitive advantage.
And for all of the pain the tax has caused families, the Texas margin tax has brought in billions less in revenue than projected.
Supporters of the Nevada proposal — which would impose a margin tax rate two-to-four-times higher than that in Texas — dismiss the problems Texas has had with the margin tax and instead point to the state’s economy, which is booming in comparison to Nevada’s. While it’s true Texas has flourished in recent years, it’s not because of the margin tax, but in spite of it.
Unlike in Nevada, where nearly 85 percent of the land is federally owned, very little of Texas is owned by the federal government, meaning Texas’ land and resources are available for private citizens to use, creating jobs and economic growth. Additionally, Texas’ oil resources give it an economic boost, it has less business red tape than Nevada, it has relatively cheap energy and has a minimum wage at the federal rate.
Several studies have explored the idea of changing or repealing the tax and found that repealing it would create 41,500 net new jobs within a matter of years, add $3.4 billion in net new investment and increase personal, disposable income by $9.8 billion.
State Sen. Craig Estes is one of the many Texans to recognize the benefit of ridding the state of this destructive tax, so he has introduced a bill to repeal it. Hoping to educate Nevadans about what a margin tax means for a state’s economy, the senator is coming to the Silver State next month to give talks in Las Vegas and Reno.
As voters consider Texas’ margin-tax mistake, it’s important to understand the economic implications of such a move. I hope you’ll take a couple hours out of your day on May 13 if you’re near Las Vegas or May 14 if you’re in the Reno area, to join us in listening to the insights Sen. Estes has to offer.
And congratulations to “fsdnevada,” who is leading our NCAA bracket challenge this week!
Thanks for reading and have a wonderful weekend.
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