Conservative group: Initiative could tax money-losing businesses

CARSON CITY - As two unions filed paperwork Wednesday to circulate a petition for a business tax they hope would fund public schools, a conservative think tank argued the tax would apply even to businesses losing money.

The Nevada State Education Association and the AFL-CIO filed with the secretary of state to circulate a petition that, if approved by legislators next year or voters in 2014, would impose a 2 percent business margins tax.

Geoff Lawrence, deputy policy director of the Nevada Policy Research Institute, said the petition is not a tax on business profits because it doesn't allow companies to deduct all possible expenses. So, a business whose total expenses exceed its income still could be subject to the tax.

But Nevada State Education Association officials do not think a money-losing business would be subject to the tax, President Lynn Warne said. Only businesses with annual revenue exceeding $1 million would pay any taxes, she said.

The unions must collect signatures of 72,324 registered voters by Nov. 13 to force the Legislature to consider adopting the tax in its 2013 session.

Assemblyman Pat Hickey, R-Reno, said he doubts there is the two-thirds support needed for the petition to pass the Legislature next year. If legislators reject it, the issue would be placed before voters in November 2014.

The Education Initiative petition is basically a rewritten version of Assembly Bill 582, which went nowhere in the 2011 legislative session. Gov. Brian Sandoval opposed that proposal.

Warne estimated the margins tax would bring in $800 million annually.

On Tuesday, AFL-CIO Executive Secretary Danny Thompson said it would bring in $400 million to $500 million. The money would go into the general fund, but Warne said she hoped "legislators do the right thing" and use the funds as additional money for public education.

Added tax money could end the threat of teacher layoffs, reduce class sizes and restore programs that now face elimination, Warne said.

The petition could not direct funds for education because it would be challenged by opponents with violating the single-subject rule, Warne said.

Lawrence said his organization normally does not challenge the validity of initiative petitions but said it is likely some organization will file a lawsuit.

Warne said the unions will wait at least 30 days before collecting signatures in case there is a legal challenge.

The Las Vegas Chamber of Commerce needs to review the petition before it takes a position, said spokeswoman Cara Roberts, but the chamber opposes "legislation by petition."

Lawrence said a business margins tax is one of the worst ways to raise revenue. He said the Texas Legislature in 2009 had to consider more than 100 bills calling for changes and repeal of its margins tax law. Texas is the only state with a margins tax.

Contact reporter Ed Vogel at evogel@reviewjournal.com or 775-687-3901.