key facts about the margin tax initiative (question 3) stopthemargintax.com 1 naiop presentation...
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KEY FACTS ABOUT THE MARGIN TAX INITIATIVE (QUESTION 3)
StopTheMarginTax.com
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NAIOP PresentationJune 6, 2014
About the Margin Tax Initiative (Question 3)
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Question 3 is a ballot initiative that will be on the NV general election ballot in November
New 2% business tax on GROSS revenue Businesses with more than $1 million in annual gross revenue would have to pay Would have to pay EVEN in years with no profit Equivalent of an almost 15% corporate income tax – higher than CA
About the Margin Tax Initiative (Question 3)
Businesses with more than $1 million in annual gross revenue would have to pay
Creates a “fiscal cliff” for businesses Businesses that gross one penny more than $1 million would pay the 2% Margin
Tax based on the entire million
Businesses could ONLY deduct Modified Business Tax (MBT) liability plus one of three deductions:
Cost of goods soldCosts of employee compensation (up to $300K/employee)Standard 30% deduction
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About the Margin Tax Initiative (Question 3)
NO guarantee of more money for education Legislature would have complete authority to divert funds Legislature has history of diverting funds designated for education (ex. 2009 room
tax diversion)
NO plan for how any funds going to education would be spent Initiative provides no plans or requirements to ensure that revenues go to
classroom instead of the hands of bureaucrats
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About the Margin Tax Initiative (Question 3)
Gigantic tax increase by anyone’s standards
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Proponents original estimate: $800 million/year
Guinn Center estimate: $460 million/year
Applied Analysis estimate: $650-$750 million/year
About the Margin Tax Initiative (Question 3)
For businesses, would make NV one of the five highest taxed states in which to operate
Although 87% of NV businesses would be exempt from directly paying the tax, 80% of NV businesses are considered micro-businesses, meaning they do not employ anyone
The vast majority of job-generating businesses in NV would be subject to the tax.
Thousands of small businesses would NOT be exempt
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About the Margin Tax Initiative (Question 3)
8,860 jobs when indirect impacts included
$413 million in reduced labor income when indirect impacts are included
A total of $1.1 billion in reduced economic activity when “ripple” effects are considered
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According to Applied Analysis, the effects of the Margin Tax Initiative translates to:
About the Margin Tax Initiative (Question 3)
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Initiative would increase consumer costs
Would impose the new tax on almost all types of goods and services sold including:
Food, clothing, gas, electricity, telephone services, prescription medicines, childcare and medical care
Ultimately, some or all of the increased costs would be passed on to Nevada consumers.
Anticipated impact on real estate industry
Rents, reimbursements and commissions would be subject to the Margin Tax Initiative
o Reimbursement expenses, such as common area maintenance fees would likely be included in total revenue
Would both a broker and an agent, if both exceed the $1 M threshold, be subject to the proposed Margin Tax?
o The initiative does specifically exempt “pass-through” revenue, revenue received by a business entity solely on behalf of another
o This provision would likely limit double taxation
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Anticipated impact on real estate industry (cont.)
Real estate industry is expected to bear a significant share of the incremental tax burden if the Margin Tax Initiative passes
Current figures:
o Estimated modified business (payroll) tax payments: $7.4 million
If the Margin Tax Initiative passes: o Net taxable business receipts: $6.9 billiono Gross business tax liability: $69.7 milliono After deducting MBT: $62.2 million
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Anticipated impact on real estate industry (cont.)
11This is a preliminary draft document. It is subject to material review and revision.
Who has joined the Coalition?Associated Builders and Contractors, Nevada Chapter
Associated General Contractors, Las Vegas Chapter
Associated General Contractors, Nevada Chapter
Builders Association of Western Nevada (BAWN)
Carson Valley Chamber of Commerce
Economic Development Authority of Western Nevada (EDAWN)
Elko Area Chamber of Commerce The Fallon Chamber of Commerce
Las Vegas Metro Chamber of Commerce
The Chamber of Reno, Sparks, and Northern Nevada
Churchill Economic Development Authority Carson City Chamber of Commerce
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National Federation of Independent Business – Nevada Nevada Association of Employers
Nevada Farm Bureau Federation Nevada Manufacturers Association
Nevada Mining Association
Nevada Resort Association
Nevada Restaurant Association
Nevada Taxpayers Association Retail Association of Nevada Southern Nevada Homebuilders Association
Nevada Association of REALTORS
Dayton Chamber of Commerce
What is being done to oppose the Margin Tax?
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Coalition formed representing thousands of small and large businesses, groups and individuals citizens
Actively soliciting coalition members and presenting to groups
Here’s how you join: StopTheMarginTax.com
News items, analysis, fact sheets, Facebook
& Twitter links, sign up and donation forms, etc.
Launched social media and e-newsletter March 20th
Get Involved
Join our coalition
Make a contribution
“Like” us on Facebook and follow us on Twitter @stopmargintax – use our hashtags: #StopMarginTax, #NO on 3 and #NOon3NV
Forward our e-newsletter to friends, family and colleagues
Retweet our Twitter posts and “share” our Facebook posts
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Get Involved
Utilize our online “tool kit” for employers Break room flyer Campaign Brochure Contribution Form Frequently Asked Questions Coalition Sign Up Form Letter to Editor Guidelines Link to Us Talking Points What Your Business Can Do What Your Organization Can Do
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Discussion & QuestionsStopTheMarginTax.com
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