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

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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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