In 2014 Nevada voters rejected by 79 percent to 21 percent a proposed margins tax, effectively an income tax on state businesses. Despite this unequivocal rejection at the ballot box, lawmakers a few short months later passed a similar, though currently somewhat smaller, tax called the Commerce Tax.
The Commerce Tax passed with a two-thirds majority in the Republican-controlled Assembly and Senate and was signed by a Republican governor.
In 2016 a group called RIP Commerce Tax filed an initiative petition to place repeal of the Commerce Tax on the 2016 ballot, but the effort stalled when, with only a month left until the deadline for gathering signatures, the courts ruled the wording of the petition failed to sufficiently warn voters that a tax repeal would unbalance the state budget — like that would come as a startling development to anyone.
This past week the same group, this time with a new moniker, Repeal the Commerce Tax, filed another petition, fixing the wording to satisfy the courts, and plans to begin gathering signatures.
The group is still headed by state Controller Ron Knecht, as president, and former Las Vegas City Councilman and state Sen. Bob Beers, as secretary-treasurer.
Knecht noted the group has started its petition drive earlier in order to allow for expected legal challenges. He said their lawyers advised them to use exactly the language the courts told them to use the last time.
“Essentially, we are saying here’s what the Legislature passed, do you all agree?” Knecht said in a recent interview. “Do you want to vote for it or against it. If you vote for it, you get the Commerce Tax. You vote against it, you repeal the Commerce Tax. You have the final word.”
The petition includes the entire text of the Commerce Tax law as well as a 200-word description of effect that mirrors the courts instruction to explain the impact repeal would have on the state budget. “They said use exactly what the two courts said and that’s what we did,” Knecht said. “That should make the description of effect pretty much bullet proof.”
By the time the Nevada Supreme Court ruled in 2015, the RIP Commerce Tax had already gathered 20,000 signatures of the 55,000 needed, but they had only a month left to gather signatures, and those 20,000 were ruled invalid.
Knecht said this time the group has joined with Americans for Prosperity for assistance in gathering signatures.
“It is true we have to gather twice as many signatures this time due to turnout in the two elections,” he noted. Petitioners must collect signatures equal to 10 percent of the total votes cast in the most recent general election in each of the state’s four Congressional Districts.
Because the 2016 election was a presidential one and twice as many votes were cast than in 2014, Knecht said the group must gather 112,000 signatures — 28,000 in each Congressional District — but they plan to gather 160,000 signatures to allow for signers who might not be qualified.
“Once the thing gets onto the ballot, the issue is going to be real simple: One, this is about jobs,” Knecht said. “The Commerce Tax is a job destroyer. Repealing it will be a real help. And, secondly, for all those people who think, oh, this is just about corporate taxes and fleecing the millionaires and billionaires, et cetera. Well, you’re wrong. As economists have proven many times over, business doesn’t pay tax, it collects it from its customers. This is about jobs and the burden on Nevada families and businesses.”
According to the petition’s new description of effect, the Commerce Tax is expected to generate about $102 million in the coming fiscal year, which Knecht noted is only about 1 percent of the state’s total revenues. The description notes that such a shortfall can be offset by cutting spending, drawing down the state rainy day fund, raising other taxes or some combination. Somehow the state managed to survive when the recession axed the state revenues by $536 million from 2008 to 2009.
The Commerce Tax imposes a gross receipts tax on all businesses grossing more than $4 million a year. It has different tax tables for 27 different industries — ranging from a low of 0.056 percent for mining to a high of 0.362 percent for rail transportation in 67 different levels of revenue. Those rates could easily be increased.
We urge Nevadans to sign the petition and to vote to repeal this end run on the state’s constitutional ban on an income tax. — TM