Passed during the 2015 legislative session in Nevada, the Commerce Tax, or Senate Bill 483, has been a sore spot for business owners over the past two years. It’s a frustrating tax for several reasons, not the least of which is, the year before, Nevadans voted against a similar tax only to have the legislature push it through the very next year despite majority wishes. Now, however, it seems as though this thorn in business’ side has the possibility of being relieved.
Ron Knecht, chief fiscal officer for the state and a Republican, has joined with former Las Vegas city councilman Bob Beers, also a Republican, to form the Repeal the Commerce Tax, Inc. political action committee (PAC). The PAC’s goal is to repeal the commerce tax on gross revenue of businesses that exceed $4 million in a fiscal year. Currently, the potential ballot measure is in the signature-gathering phase and needs 112,544 signatures by mid-June of next year.
The ballot measure has several supporters including Attorney General Adam Laxalt who is running for governor and will, himself, be on the ballot next November. However, among it’s biggest detractors is current Governor Brian Sandoval who has said that repealing the tax would cause irreparable harm to education programs and that, “every single program would be eliminated.” It’s no surprise Governor Sandoval is against a repeal of the tax, he and his cronies were instrumental in pushing it through the 2015 legislature. However, it’s a bit much to say that a repeal of the tax, the stated intent of which is to fund education, would have such a detrimental effect on education.
Let’s consider the numbers for a moment. According to a recent Legislative Counsel Bureau analysis, a repeal of the commerce tax could cost the state government about $161.3 million in fiscal year 2019. In fiscal years 2020 and beyond, the financial impact of the repeal would drop to about $97 million. The commerce tax brought in $143.5 million in state revenue for fiscal year 2016. So, according to best estimates and reports, we’re looking at a loss of, between, $97 million on the low end and $161.3 million on the high end of the spectrum.
No doubt, that’s a significant chunk of change should the commerce tax be repealed. However, let’s look for a moment at some of the other tax-related issues this state has been a part of in the past few years. I’m specifically thinking of tax abatements for large companies to move here, a trend that Nevada’s leadership has been too apt to fall into. According to a newly released report from the Nevada State Controller’s Office, as a consequence of corporate tax abatements, in fiscal year 2017 the state will forego over $180 million in tax dollars. That’s about $20 million more than the highest estimate of tax losses from a repeal of the commerce tax.
I have a question … if the commerce tax hasn’t, as the governor says, “hurt our ability to attract great companies to the state,” then why exactly are we giving away such a huge chunk of tax dollars trying to get companies to move here? The numbers aren’t lying and, just by looking at the largest estimated loss from a commerce tax repeal and the 2017 estimates of losses from tax abatements, the state is in the red. Nevada business has been built on tax-friendliness. Not only are we abandoning that concept, we’re giving large companies huge tax abatements to keep the illusion alive and small business, our backbone, is suffering.
CALL TO ACTION: Sign the petition for Repeal the Commerce Tax and, on November 6, 2018, vote to repeal the commerce tax. It’s time state officials pay attention. It’s also time Nevada businesses are protected and allowed to flourish and the best way to do that is to repeal a toxic tax while pushing for reform in both education and taxes.
2 Chronicles 7:14 (NKJV) “If my people who are called by My name will humble themselves, and pray and seek My face, and turn from their wicked ways, then I will hear from heaven, and will forgive their sin and heal their land.”
By Whose Authority?
For more information on my Commentary and to see some of my backup research, or if you wonder why I take the position I take, go to www.LyleBrennan.com.