commentary:

Same as it ever was

By Jon Ralston (contact), In Business reporter

Fri, May 29, 2009 (3 a.m.)

As I listened last week to the apocalyptic pronouncements of a few lawmakers before a $780 million tax increase passed both houses, I had a strange sense of deja vu.

State Sen. Barbara Cegavske called a half-percent increase in the payroll tax a “job killing tax” after spewing other cliche-

ridden arguments she probably wrote in January. Assemblyman Chad Christensen said it was “morally wrong” to enact the tax after he visited businesspeople in his district who were suffering from the economy.

And then I realized where the feeling was coming from: Six years ago. Same place. About the same time. An $830 million tax increase with that new payroll tax as its centerpiece.

In 2003, during what I have called The Great Tax Non-Debate, a handful of senators (yes, Cegavske was there) and the so-called Fearless Fifteen in the Assembly (yes, Christensen was there) provided similarly apocalyptic predictions of businesses fleeing the state or being extinguished by the heavy hand of a — wait for it — 0.6 percent payroll tax.

Shockingly, none of that happened and six years later, the Republicans have fewer seats in both houses of the Legislature. Now who could have predicted that?

Indeed, one of the greatest similarities is the comments then and now from business leaders after the passage of the payroll tax creations/increase — notably less hysterical than lawmakers who (both times) failed to stop the enactment of the tax to fund essential services such as education and health care.

“I don’t see how that’ll affect things much,” Michael Newman, an investment broker with Colliers International, said in 2003 after the payroll tax was enacted.

“We still have low taxes. No, it’s not a no-tax environment,” echoed Ken Ladd, president of U.S. Bank in Nevada and at the time the head of the Nevada Development Authority. “We’ll overcome that. There’s still a whole lot of reasons to do business in Southern Nevada.”

But what about now? That payroll tax has been doubled and business license fees also have increased 100 percent. Is this the beginning of the flight of Nevada businesses? And to where? California?

The most striking aspect of The Great Tax Non-Debate of 2009 was the muteness of the various business groups in opposing what Cegavske insists will destroy the economy and Christensen finds morally repugnant. Is it possible that this time the minority GOP lawmakers know something that successful businesspeople do not? Doubtful.

One of the reasons the business cohort kept its collective mouth shut was because the main agenda for the chamber set was to start pulling back on public benefits many members see as the real threat to their bottom lines in the future. If the state is forced to pay out more than it has in the next few decades, who do you think the Gang of 63 will come after to find the money?

Other groups — the retailers and manufacturers, for instance — were thrilled (as they were in 2003) that any real business tax was not passed. No corporate profits tax. No sales tax on services. And, of course, no resurrection of the dreaded gross receipts tax, which they all insisted six years ago would have turned Nevada into a, well, desert.

The fact is — and it is a fact — that even after the doubling of the payroll tax and the business license fees ($100 to $200 and no per location charge for major outfits), Nevada is still a wonderful place to do business — or at least will be when the economy rebounds. Paying a little more than 1 percent on your workforce if you have more than $250,000 in payroll doesn’t seem likely to dissuade anyone from coming here or inducing anyone to go elsewhere.

No one ever seems to want to put this in context, but the chamber types know it and know how lucky they are: Most other states have corporate income or gross receipts taxes on business. And even though many of those economies do just fine, the thought of imposing one here is always treated as some kind of doomsday harbinger.

The real story, along with the myth of economic diversification, is that generally in Nevada we get the businesses we pay for.

Discussion: 7 comments so far…

By late49er

5/30/09 at 4:48 a.m.

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I moved to Nevada about 11 years ago from Georgia to well get away from all the traffic(Atlanta) and enjoy the beauty that Nevada and California has to offer.

Nevada really is a bandit state that I suspect was created not as a state but as a state of mind. Education, who cares? If young people want education they should get the hell out of here.

I enrolled at UNR to get my masters degree and was astounded at how easy the courses were and simply put the craziness of the university and its staff. They give out a`s like everyone should simply get them, work not required.

The state government here is no different, just crazy and sucking up to whatever industry is at hand. Here it is the casino operators and other business interests.

One thing I do like here is there is no real crime because there are no laws. Basically Nevada is Mississippi with slot machines.
By MysterMr

5/30/09 at 6:17 p.m.

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Actually Jon, as usual, you have it wrong.

You want to see the true effect of this increase?

Just watch how much it doesn't generate - then watch the other revenue sources it just killed. Also consider the $100's of millions in tourism revenue going down the drain.

Oh yes, you'll see the result... in two years, 2009 will be looked back on as the "good ol' days"
By nednougat

5/30/09 at 7:18 p.m.

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I'm actually amazed at the small amount of revenue increases passed by the legislature. Sure, a tiny increase in the sales tax, and as usual, a small increase in the too high car tax. But Jesus, guys, have you seen what Cali is going through? How about Mass, where they raised the sales tax by 25%? What was our sales tax raised? A quarter percent? Yes, our students are dumber than a box of rocks, but you get what you pay for. Just pray that your kids turn out a little sharper than the Luv Gov, which should not be too much of a challenge...
By Patrick_R_Gibbons

5/30/09 at 11:28 p.m.

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Jon I find your dual personalities amusing. At the Las Vegas Sun you are as far left as you can get, on television you play the moderate.

So moderate were you that you told Launce Rake that raising the Modified Business Tax was a stupid idea. Now you act sarcastic and use weasel words to imply that the doubling of the payroll tax is in fact really small.

But perhaps, in your infinite wisdom (or moment of split personality) you can explain exactly how raising a tax on the gross payroll (the more you pay in salaries and the more people you hire the more tax you pay) won't harm job creation?
By Patrick_R_Gibbons

5/30/09 at 11:30 p.m.

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Jon, do you imagine that if those states with income taxes got rid of the income tax they might do even better?

Or do you think having an income tax makes life so great that business just flock to those states so they can pay the tax?
By lassen122

5/31/09 at 7:39 a.m.

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Pat obviously didn't understand the payroll tax language
By Patrick_R_Gibbons

6/2/09 at 1 p.m.

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I understand the tax language very well. My point was on the logical fallacy of looking ONLY at the incremental increase in taxes. I'll point to an example down in Phoenix when the city was consistently raising the sales tax. Each time the news reporters would get up and say "But its just 2 cents extra for everyone $1 you spend." It's not very much, I'll admit, but it continually adds up, which I'm sure you cannot deny.