And yet, the myth persists
It’s one of those “truths” that needs no proof in Nevada. We must maintain our high national ranking as a low-tax, pro-business state in order to attract new high-quality companies. Any potential threat to that status spells catastrophe.
Nevada has no personal income tax like most states and no broad-based corporate tax like 47 other states. Our Modified Business Tax has been weakened so many times, most businesses don’t even pay it.
Nevada typically ranks in the top three states for “business climate” despite our chronic high unemployment rate and bottom of the barrel rankings for just about any quality of life issue such as education or human services. Indeed, Nevada ranked third in the Tax Foundation’s 2014 State Business Tax Climate Index, behind Wyoming and South Dakota, the other two states with no corporate income tax.
But digging just a little deeper, the myth of low taxes/high prosperity disintegrates. In the Forbes 2013 List of the Best States for Business, Nevada is rated 36th in the country. While our state placed very well in business costs (No. 5), other rankings caused our overall status to plummet, including an educated workforce/labor supply (No. 40), quality of life (No. 47) and economic climate (No. 50).
Our elected officials keep trying to entice businesses here with tax incentives that are greedily gobbled up. Yet we see the jobs go elsewhere. One need look no further than the latest multi-million dollar giveaway to Apple, a corporation that bargained hard for a huge tax rebate and then announced it would create thousands of construction and manufacturing jobs. In Arizona.
Nevertheless, our leaders cling to the idea that miniscule business taxes strengthens our economy, while ignoring the damage our high sales tax inflicts on low-income residents. Nevada clearly has failed to thrive under the persistent strategy of extremely low business taxes. But no one seems to be able to convince the Emperor he has no clothes.
It’s obvious the Legislature will never be able to reach the two-thirds threshold needed to pass a broad-based corporate tax, even at a very low rate. Recognizing that fact, teachers and progressive groups are supporting the Education Initiative, a version of a corporate margins tax, on the 2014 ballot.
Amid the hand-wringing and dire predictions, it’s easy to lose sight of the fact that 47 other states have already implemented some sort of broad-based corporate tax and most of them score higher than Nevada in business success. In fact, Texas, a state with a bustling economy has a similar margins tax and currently ranks as No. 7 in the Forbes survey.
In a recent opinion column in The New York Times, Professor Lawrence Jacobs from the Humphrey School of Public Affairs at the University of Minnesota, compared two Midwestern states that took very different political approaches to revenue and spending in the last several years.
Wisconsin, led by the combative governor, Scott Walker, focused on destroying collective bargaining rights while also reducing taxes and tightening the budget, cutting K-12 education by more than 15 percent. Wisconsin had hoped to add 250,000 new jobs in the private sector, but currently ranks 34th in the nation for job growth with just 90,000 new jobs.
Minnesota, on the other hand, led by a progressive new governor, Mark Dayton, boldly raised taxes by $2.1 billion, targeting the wealthiest 1 percent of the state’s earners who paid 62 percent of the new taxes. The state invested much of the new funding in all levels of education, including early childhood. Minnesota now has the fifth fastest growing state economy, and earned a ranking of No. 8 on the Forbes list.
So how about it Nevada? We know that the low tax, low education funding combo doesn’t work. Let’s learn from our past and try a new approach to success.