Texas lawmaker cautions against business margins tax in Nevada
By: Laura Myers
A Texas senator Tuesday warned Nevadans not to approve a proposed 2 percent margins tax on businesses, saying it could hurt mid-size companies and efforts to lure new firms to the state.
The proposed Nevada tax, known as the Education Initiative on the Nov. 4 ballot because an estimated $700 million in annual revenue would go to improve schools, was modeled after Texas’ franchise tax.
State Sen. Craig Estes said he voted for the revamped Texas franchise tax in 2006 but last year tried to repeal it. He said the levy has punished mid-size companies and likely has slowed the state’s efforts to attract new companies or help existing businesses expand.
“Some of these mom-and-pop, medium-sized companies saw their taxes go up fourfold,” Estes said in an interview, adding that a new study suggests Texas’ economy could take off even more if the state eliminates the franchise tax.
“The overall benefits of the tax are a lot less than we thought,” he said. “Without it, we could energize the economy.”
Estes was invited by the Nevada Policy Research Institute, a conservative/libertarian think tank, to talk about the margins tax Tuesday in Las Vegas and Wednesday in Reno. He spoke to about 70 people at the Bootlegger Bistro on Tuesday.
The margins tax, Question 3 on the ballot, was proposed by the Nevada State Education Association after the teachers’ union became frustrated with the Nevada Legislature and GOP Gov. Brian Sandoval for not adding funding to education to improve the state’s last-in-the-nation status.
Proponents argue the tax would only hit 13 percent of Nevada businesses, which now pay no income tax. The mining industry, however, pays a tax, as does gaming, which is taxed on gross receipts.
Estes said Texas’ franchise tax is 1 percent on most companies that make at least $1 million in annual revenue and 0.5 percent on wholesalers. He said it wasn’t a new tax for Texas but a revised version because businesses didn’t have to pay the original levy if they were incorporated in another state. Texas limited liability corporations also were not taxed.
“It was like a voluntary tax,” Estes said.
While revising the franchise tax, Texas lowered its property tax rate from $1.50 to $1 per $100 of appraised value, Estes said.
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