An initiative proposing a tax on Nevada businesses would require the state to spend half its money on public education, would affect many people who do not consider themselves businesses and may not improve the quality of education anyway, business leaders warned Tuesday.
Speakers at a panel discussion sponsored by the Carson City Area Chamber of Commerce urged business people to oppose the tax initiative, which was filed by the Nevada State Education Association and would impose a 4-percent tax on the net income of all businesses in the state whose net income exceeds $50,000.
More money for schools does not translate into better education for students, argued Terry Campbell, executive director of the Nevada Policy Research Institute.
A provision in the initiative requires that the state spend at least 50 percent of its revenue for public education, grades kindergarten through 12. Campbell warned that could double the costs of some state expenditures.
"If the governor and the Legislature find that prisons, state employees, the Department of Motor Vehicles and Public Safety, disasters like floods or fires or any other state expense need increased spending, the costs would double because K-12 education will be guaranteed half the budget," Campbell said.
Asked later about the issues raised by the business panel, Al Bellister of Reno, research director for the education association, said later the 50-percent floor will not require any reprioritization of state budgeting.
"Public schools currently get about 40 percent of the state budget. When you add the estimated revenues from the business tax, you get to the 50-percent threshold," Bellister said.
Campbell said the average salary of a Nevada teacher is $40,542 and that benefits paid by school districts average $11,165 per teacher. He also said Nevada exceeds the national average in starting pay for teachers and how quickly their salaries rise. He said 87 percent of the state funds for public education go to salaries and benefits.
Bellister, however, said the starting pay for a teacher in Nevada is about $25,000 and recruiting teachers is becoming more difficult.
"It's outrageous for business to think that we can attract teachers to Nevada for $25,000 when they can start in private industry for $30,000 or $35,000," Bellister said.
Campbell said the $2.2 million specified in the initiative for start-up costs of administering the proposed tax is inadequate. He said the department's computers are at capacity and the department could easily need to spend $20 million to $25 million for new equipment and software for administering the tax.
"That's outrageous - he's way overestimating," Bellister countered. "The tax department's annual budget is about $11 million, so the initiative provides a 10-percent increase the first two years. The tax is calculated based on information from federal forms, to ease administration of the tax."
Ray Bacon, executive director of the Nevada Manufacturer's Association, said the state will have to create a "mini-IRS" to audit business taxes to ensure compliance. He said the tax would be imposed not only on corporations but sole proprietorships, "Schedule C" self-employed earners and even trusts and estates that have net income over the $50,000 exemption amount.
Even if an enterprise's or individual's net income were under that amount, he said, a state tax return would still have to be filed, he said, and the confidentiality requirement has specific exceptions.
"How'd you like to have that information floating around Carson City?" Bacon asked.
Phil Stout, executive director of the Nevada Association of Independent Businesses and a former Nevada legislator, reviewed the results of the NSEA 1989 initiative for a tax for education. He said the tax did not emerge from the Legislature, but since then Nevada has funded class size reduction and granted a 5-percent raise to teachers and state employees in 1993.
"The teachers got everything they wanted but, somewhere along the line, they forgot to improve academics," Stout said.
After giving examples on increased government spending on items ranging from rebuilding historic railroads and the legislative building to giving legislators $6,900 laptop computers they did not use, Stout said, "All we can do to begin to fix this is rally the thousands and thousands of small-businessmen and individuals to let them know they need to not just defeat tax increases but cut government spending."
Chamber executive vice president Larry Osborne said the chamber is part of a statewide coalition formed to fight the initiative, just as the chamber had opposed the NSEA petition a decade before. He said speakers and printed materials are being offered to help educate the public about the possible impact of the initiative.
"We support better education. We support merit pay increases for teachers," Osborne said, but not the increase proposed in the initiative. He said business people must become activists to prevent it from being adopted.
"Tell your neighbors. Tell your friends. Tell your employees."