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1 Joseph Henchman, et al., The 13 Million Percent Tax: Nevada Considers Complex, Arbitrary BLF Proposal 1 (2015)

handle is hein.taxfoundation/mptxnv0001 and id is 1 raw text is: 



Mar. 2015
No. 459

The 13 Million Percent Tax: Nevada

Considers Complex, Arbitrary BLF


By  Joseph   Henchman, Liz Malm, and Jared Walczak'
    Vice President, Legal & Economist     Policy  Analyst
    State Projects

Key   Findings

    Tax reform is long overdue in Nevada, but public finance scholars uniformly agree
    that gross receipts taxes like those in Texas and Washington are among the most
    economically destructive forms of generating tax revenue (pg. 9-10).

    Nevada policymakers are considering a proposal to convert the existing flat $200
    Business License Fee into a tiered system of 67 revenue ranges for each of 27
    industry categories. Additionally, foreign filers and non-employer businesses
    would pay a flat fee of $400, bringing the total to 29 categories of filers and 1,811
    possible flat-dollar-amount tax liabilities (pg. 3, 7, 11)

    The proposal is targeted to generate $250 million per year once fully implemented
    and is projected to raise $438 million over the first biennium. However, these
    revenue estimates may be inflated by hundreds of millions of dollars (pg. 14-15).

    While attempting to mitigate the inherent flaws of gross receipts taxes, the
    designers of the BLF created a complex tax structure that violates the principles
    of simplicity and neutrality (pg. 12-13). The proposal requires significant additional
    administration costs and compliance burdens, and a quick implementation invites
    disaster (pg. 13-14).

    BLF rates are arbitrarily calculated using Texas data from a single year, despite the
    high likelihood that such data is not representative of Nevada's economy (pg. 6-8).
    BLF rates do not correlate with profitability, resulting in punitive taxes for some
    and taxation of unprofitable firms (pg. 10).

    The BLF designers incorporated revenue cliffs that result in absurdly high marginal
    tax rates, reaching over 13 million percent (pg. 8-9). BLF designers concede
    pyramiding will be a problem, violating the principle of neutrality (pg. 9-10).

    BLF industry categories were arbitrarily selected and will result in tax arbitrage and
    economic distortions, as seen in states with similar taxes (pg. 11-13).

    Texas and Washington, while providing the model for the Nevada BLF proposal,
    are considering proposals to repeal their analogous taxes (pg. 17).

    The BLF proposal violates the principle of transparency by mislabeling an obvious
    tax (pg. 15).

    The BLF as proposed likely violates the interstate commerce clause and federal law
    (pg. 16-17)

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