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Facts and fiction about the unions tax initiative

Executive Summary

Among the most challenging policy decisions facing Nevada lawmakers is designing a state tax system that generates stable revenue to finance critical government operations, such as defining and protecting property rights, without imposing unnecessary distortions or damage upon the economic system.

This brief study examines a business margin tax, as proposed by the state teacher union and AFL-CIO, in the context of the broader goals of tax reform. It concludes that a margin tax would accomplish none of the major goals of tax reform, but would instead add multiple new burdens on the Silver State economy. Of significant concern is that the proposed margin tax would:

  • Penalize small businesses.
  • Penalize struggling businesses and exacerbate the instance of firm closure or bankruptcy.
  • Tax certain sectors of the economy more heavily than others.
  • Thwart economic diversification.
  • Cause a higher effective tax rate against more complex goods.
  • Violate the confidentiality of federal business tax filings.
  • Reduce the demand for labor.

A business margin tax in Texas — after which the unions’ proposal is modeled — has been widely recognized as a tax-policy failure. In 2009 alone, Texas lawmakers heard more than 100 bills proposing to modify or repeal the tax.

Nevada should look to import successful policies from other states — not failing ones.

 

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Geoffrey Lawrence is director of research at Nevada Policy. Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association. From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation. Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.

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