Public Schools’ Taxing Problem

No matter your stance on Question 3, we can all agree our education system needs fixing. And that requires money.

Illustration by Jon Estrada

Illustration by Jon Estrada

It starts with the semantics. Those who support Question 3 call it the “Education Initiative.” Those opposed dub it the “Margin Tax.”

What is it? Business owners with revenue in excess of $1 million will be taxed at 2 percent of total revenues. However, they are also permitted to choose one of three deductions to lower their tax burden: In general, they can deduct 30 percent of revenue; the total cost of employees; or the total amount of goods sold. And, if the business pays payroll taxes, that’s a deduction, too. Nonprofits will be exempt.

Where will the money go? Question 3 states that “the proceeds of the tax [will] be used to fund the operation of the public schools in this state for kindergarten through grade 12.” It doesn’t seem like the basis for the biggest battle of this election season. But it is.

The anti-margin tax campaigners have gathered under the banner of the Coalition to Defeat the Margin Tax. The organization has raised about $4 million; the leading donors are the Nevada Resort Association, Nevada Mining Association and the Las Vegas Metro Chamber of Commerce. Their website lists organizational supporters from the Nevada Bankers Association to the Cuban Heritage Foundation, plus dozens of businesses and a list of “community leaders,” who seem to be a random assortment of real estate agents, office mangers and the “self-employed.”

The opposition’s battle cry: “It’ll cost you your jobs!” We hear that every time the smallest shard of profit is threatened, whether it’s closing a tax loophole or raising the minimum wage or not allowing fracking in your neighborhood. There is also concern that the tax would irreparably harm the small-business owner, but the number of small businesses donating in the four figures (and up) to fight Question 3 seems to belie the idea that they’re barely getting by. A study done by local research firm Applied Analysis and commissioned by the Coalition to Defeat the Margin Tax states that “a majority of businesses in Nevada would not pay the margin tax,” as their revenues are too low.

Support for the Education Initiative derives primarily from the Nevada State Education Association, i.e., the state teachers’ union. They view Question 3 as an attempt to raise desperately needed funds to improve Nevada’s education system, which regularly ranks among the worst—if not the worst—in the nation. According to the Education Law Center, Nevada consistently spends less on education per pupil than the national average—almost $2,000 less. The ELC also gave us an F for the fairness of our school funding: Wealthier districts receive more than $3,000 more per student and have about one-third fewer students per classroom than schools in poorer areas.

Both groups have cited studies that back up their views. The pro-3 contingent points to a study done by the UNLV Center for Business and Economic Research: The tax will generate up to $362 million and create 11,500 jobs. However, this study was promptly denounced by UNLV acting President Don Snyder, who said it “did not support the views of the university.” (The university, incidentally, has no trouble asking for increased sales taxes to fund a new on-campus stadium.) The anti-3 side cites a study prepared for the Nevada Policy Research Institute by the Beacon Hill Institute that claims it will cost business owners $862 million and result in a net loss of 1,640 jobs statewide.

Opponents of the tax use fear as their main selling point. Homeowners open their mailboxes to find daily fliers urging them to vote against Question 3. Renters have gotten mass emails from their landlords threatening to raise their rents if Question 3 passes. They defend the idea of maintaining our current educational status quo by insisting that the money won’t actually go to schools—or it will, but other school funding will disappear. Still others declare that the school system is lousy, so why should we waste more money on it? Which seems rather like saying “My car isn’t running right; why would I waste money having it repaired?”

Texas has a very similar tax, and they lead the nation in job growth. The percentage of tax is lower, but Texas also has a corporate income tax. Nevada is one of only three states with no corporate income tax. How much business has that brought us so far?

You know what’s costing us jobs and keeping businesses from locating in Nevada? Education. Parents don’t want to raise children in a state with a terrible education system, so companies go elsewhere. And because our education system is terrible, we don’t have enough well-educated and trained potential employees—so, again, companies go elsewhere.

One important yet often-overlooked aspect to Question 3 is how it came about. The proposal has always been a political orphan, with State Senator Tick Segerblom being the only elected official to openly support it (everyone else is either against it or refuses to state a position). Question 3 is here because supporters got more than 100,000 voter signatures, the required number to force the initiative onto the ballot. If you’re interested in the idea of voters organizing to force their public servants to address important issues, Question 3 is a prime example of just that. Of course, this might be another reason why opposition is so fervent: Can you imagine what would happen if citizens did this all the time?

But let’s return to the focus of this battle: our state’s students and schools. I taught in the Clark County School District for eight years. My final class consisted of 26 first-graders, but I only had space and materials for 16. Six bathrooms for almost 800 kids. Portable classrooms so old that when the district tried to move them, they disintegrated. Something needs to be done and, yeah, that something is going to involve money. Or we can keep lamenting the state of our schools while refusing to do anything to solve the problems and create a Nevada our children deserve.

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