Nevada: We’ll pay you to exploit us
Brian Sandoval thinks every corporation in the nation should want to come to Nevada. He dials Fortune 500 friends on his smart phone, promising them all-you-can-eat-sushi, trips to the Bunny Ranch, free gaming tokens and no, no taxes.
Weird. They’re not biting.
Why not? A California company with annual net profits of $100 million would pay $8.8 million a year in state corporate income tax. That’s a tax on net profits, the money a business clears after paying for employees, inventory, utilities, lobbyists, golf vacations with politicians and corporate jet fuel.
In Arizona, $100 million in profits equals $7 million in taxes. In New Mexico, $7.6 million. In Oregon, $7.9 million. In Utah, $5 million. Idaho’s a cheap date—only $1.9 million. Colorado’s a steal—$1.1 million.
Drum roll, please. In Nevada, if your company makes $100 million, you pay $0 million in state corporate income tax. Nada.
Solid argument. Save money. Set up shop in Nevada.
The strategy has failed miserably.
Why aren’t businesses coming here? Asked this on a recent TV news show, Sandoval assures Nevadans that the businesses do not care about schools or quality of life. That’s surely not the problem. Companies might be enticed to move to Nevada, he says, if we provided incentives. Other states give corporations financial incentives to relocate, as it costs money to move a business. Make sense?
If a company is going to contribute $8.8 million to California’s coffers, California can afford a kick-back. If a company is going to contribute $0 million to Nevada’s coffers, and we toss in a couple million signing bonus, we’re out a couple million.
I find it hard to believe that corporate execs running businesses with profits in the multimillions or multibillions are unable to do math. Surely business execs see that the dough it costs to move to Nevada would pay itself back within months of moving here from California or Oregon. They aren’t dumb.
So Nevada must lack something. What is it? We’ve got free casino booze and some of the cheapest smokes in the West. Tattoo parlors, legal hookers and pawnshops. What’s not to like?
Maybe it’s burdensome taxes passed in 2009, like Nevada’s business license fee, raised (temporarily) from $100 to $200. Per year! The fee increase expires on July 1 unless the lawmakers vote to keep it.
Also set to expire, Nevada’s “payroll” tax. This is the closest Nevada gets—besides paying property tax and collecting sales tax—to asking companies who employ humans in Nevada to pitch in and pay for things those humans might require. Asphalt is not free. Neither are roads, police, fire services, K-12 public schools or streetlights.
In 2009, employers began paying a tax based on employee wages. The tax is complicated, with a slightly higher percentage required from salaries above $250,000. For an employee making $40,000 annually, the company pays around $200. For an employee making $400,000 per year, the tax is about $3,000.
Yes, $3,000 is lots of money; it’s about what Nevada students pay for one semester’s tuition at UNR. But the company pays its employee almost half a million a year, and it pays no corporate income tax.
To recap: Nevada’s short on dough to maintain the crappiest possible level of state services—the levels we have now. If kept on the books, the business license fee and payroll taxes would help bridge Nevada’s gaping budget deficit. We don’t have a state income tax or a corporate income tax. We allow mines to walk off with our gold, nearly tax-free.
Now Sandoval insists recovery will come if we give businesses money to come here.
Epiphany. Maybe companies don’t want to come to a state with decaying schools, overcrowded classrooms and undervalued teachers.
It’s the education system, stupid.