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July 30, 2014

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Jon Ralston:

Nevada’s apple rots at its core

Confession: I love Apple.

My dad had an Apple II. My first computer was a Macintosh. I have never owned a PC (sorry, Mr. Gates).

But when I read The New York Times piece about the company’s playing The Biggest Little City as The Biggest Little Suckers in the world, I knew that something was rotten in Reno. And the subtext of the story, while not focused on the Northern Nevada tax haven, reveals less about Apple finding a way to save money than how this state has allowed exactly the wrong kind of economic development. Even more infuriating: This gives the lie to all the rapacious folks over the years who have pulled a fortune from the Nevada economy, given back a pittance and wailed like newborns whenever anyone suggested a business tax.

This part of the Times expose (the story of Apple’s Renophilia was first reported by KLAS-TV last year) bears repeating:

“Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: It has avoided millions of dollars in taxes in California and 20 other states.

“Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.

“California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.”

And look what that has wrought: Company executives who gaze longingly at Nevada, their salivary glands in overdrive, thinking how easy it is to plant a few employees here and then grow astronomical profits while providing not one scintilla of assistance to the state.

But I am not the least bit incensed with those bad corporate citizens, nor am I upset with Apple, which is taking advantage of the laws as they are written.

What happens in Reno does not stay in Reno. This is a statewide phenomenon, the natural byproduct of decades of not-so-benign neglect by state leaders who have bowed to sound-bite (“no new taxes”) arguments instead of standing up to special interests and considering more nuanced solutions (“broadening the tax base, bringing in more payers, lowering sales taxes, excising the payroll tax”).

I can only imagine the discussion in the Apple boardroom:

“Hey, what about Nevada? They don’t charge businesses anything.”

“But they might get suspicious if such a well-known company opened a storefront just to hide a tax haven.”

“No worries. We’ll call ourselves Braeburn Capital. Those rubes won’t get the joke that it’s a kind of apple.”

“Yeah. And it’s sweet and tart. A sweet deal for us, and those Reno folks are the tarts.”

Think I’m close?

This is not the economic development Gov. Brian Sandoval is touting to reinvigorate the state’s economy — at least I hope not. Indeed, while the Nevada Policy Research Institute and others have criticized the governor’s methods — tax incentives to bribe companies to come here to compete with other states — he has identified a half-dozen or so sectors Nevada should try to woo.

Indeed, the governor was in Los Angeles on Monday, taking the hands-on approach he promised he would and touting the state to biotech, film and real estate folks.

I continue to think Sandoval, all of his good intentions notwithstanding, will be hamstrung by these companies looking at our educational system and following up the governor’s entreaties with statements like, “Well, I don’t think we want to move there. But we might consider doing what Apple did.”

Beyond the lack of value placed on education — and thus the consignment of the state to fertile territory for tax dodgers, call centers and warehouses — the Apple story also points up the inherent absurdity of Nevada’s tax structure, which is not designed to allow the state to benefit from new businesses; instead, they are a drain on resources that could be used to provide better education, infrastructure, health care and more.

As one wag put it, “From the state’s view, a new business that is not gaming, mining, insurance or the sale of taxable goods is all cost and no revenue.”

Leaders tout businesses such as Switch Communications and Zappos as wonderful additions to the state and city. While they may be fine corporations, they will not help fund education. They will pay a tiny payroll tax, a minuscule business license fee and, through their employees, sales taxes. Compared with what established industries such as gaming or mining or insurance bring into state coffers, they pay nothing for the privilege of doing business here.

Before NPRI’s screed-makers fire up their laptops, I am not arguing for higher taxes (yet) as much as saner tax policy. Or any tax policy.

That’s what this episode exposes. This is Nevada distilled: always settling for a bite of the apple, never devouring the whole thing.

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  1. Saw this commentary on Johns's show last night, and it instantly showed that we here in Nevada are a bunch of dopes. All of us. Apple is now bigger than Exxon, but they pay nothing to park here? They are bigger than some European countries, but they pay NADA here? It's one thing to live in a dumb state that outlaws lotteries, but another to not have ANY tax on any kind of businesses. We are a bunch of sheep being led by right wingnuts like Wynn and Adelson. Good, collect your unemployment, and when it runs out, head for a more sensible state. Hope your kids can cope with a real education elsewhere that is supported by more than us stupid home owners and renters...

  2. Mr Ralston would not be happy until we pay more taxes. Because in his mind throwing more money at education must equal better educated students. Does he actually think Apple would even have an office here if there were more taxes on businesses? No, they would just relocate elsewhere.

  3. It seems like what is being said is that Nevada wants a company to play big or stay home. If the state instituted a tax that would tap Apple for some of that profit, they would probably shop around for a better deal. And perhaps the feeling is that they cost the state more to be here than they pay the state. So, take those few jobs and hit the bricks some would say. And the same to Microsoft and probably many other. Microsoft has dozens of investment subsidiaries in Nevada for the same reason as Apple and others. Microsoft was noted yesterday in a Wall Street Journal article about their investment in Barnes and Noble though a new Nevada subsidiary.

    http://blogs.wsj.com/cfo/2012/04/30/micr...

    Clearly the state needs none those jobs and these freeloaders must all go. At the end of the day, you set your tax policy and you get what you get. If you do not like what you are getting, you can change your policy and change what you are getting. That change will be both in revenue and whether companies have facilities in the state or choose to locate elsewhere. Like everything else, economics is about choices.

  4. The idea that Apple or any of the other corporations who are here due to the zero corporate tax environment would immediately pull up roots and move elsewhere should we adopt a 2 or 3 percent corporate tax is and absolutely absurd thesis. When compared to the 8% plus levied in California and the higher rates; Alaska, Arkansas and North Dakota are the only states that start at 1% or slightly above and I do not see most corporations rushing to relocate to two snow-bound frozen tundra states or Arkansas. Nevada needs a restructured tax system and will flounder until we put legislators in place who understand this and have the intestinal fortitude to move on the problem.

  5. They could resolve this by adding a stipulation that a company given such breaks must locate a certain number (1000?) of employees to the state. Said employees must have their primary residence here and reside in the state for 9 months or more per year. Then we would get the privately-generated revenue that the state counts on when it gives companies breaks like this one. Otherwise, it's another verse of "they got the gold mine; we got the shaft."

  6. After reading the article and also the comments, I cannot fathom that some of you still don't get it!

    It's a worse problem than the illegals using up community resources, or at the very least, falls into the same category and level of abuse.

    Nevada gets sucked drier than the desert sand by parasites! AND the rest of us foot the bill...and some of you are okay with this???

    Good grief, the dumbing-down of the people in Nevada is most apparent in the comments section of this paper.

  7. If any of those in favor of changing Nevada's corporate tax structure actually own and operate a business of any size, their comments would have merit with me.

  8. Author, you are very wordy. It takes you forever to make a point (I think you were trying to make a point?). Write concisely. I got bored and stopped reading.

  9. I agree with Robert Plumlee. A 2% or 3% corporate tax in Nevada would not be significant to most companies, compared to the 8% or so that most states have.

    Another idea for raising more revenue is to do for individuals what Nevada does for Corporations. For a $100 a year fee, anyone in the country can become an official "resident" of Nevada and not have to pay any state income taxes. This would raise a lot of money without any "true" resident having to pay any more taxes..

  10. I am surprised that more companies do not set up offices here. With the internet most companies could probably operate as well from here as from anywhere. Could this have something to do with the fact that we have such a poorly trained work force?

  11. Stupid comments by Ralston. Nevada's benefit is jobs Jobs JOBS. People employed contributing to the Reno economy and yes, paying taxes. Ralston will discount that, but he would make himself the fool once again if he does.

    Every lib like Ralston loves government to have more of our $$$ and they will bend the truth every time to try to make that happen.

    Also---never go after the government for how they piss the dollars away, blame companies for supposedly not giving enough.

  12. Yes, we start at 1% tax. Think that will solve the problem?? You know the libs at the State house will jack that up every year to pay for more and more inefficient programs. It's only some one else's money. Who cares where it comes from, we just want more of it!

  13. I'm betting Jon Ralston took every deduction and every loophole he was allowed, when his accountant filed his taxes.. Do we see a article about that?? Nope, because he is a liberal and libs are immune from walking the walk and talking the talk. its always "The other guy must pay, not me."

  14. The Bottom Line is: Nevadans Do Not have the Education to attract Major Corporations that rely on a Highly Educated Workforce.

    These High Tech Corporations Value Highly Educated People and the Multi-Billion Dollar Corporations they Create.

    At Zero Tax NEVADA is unable to attract anything other than Warehouses, Call Centers, Highly Service Sector oriented Corporations and Corporations Needing a Tax Dodge with a minimal Nevada presence.

    The Current economic policies have kept Nevada near the Bottom in Wage Levels, Job Creation and Economic Revival. So anyone arguing against a Business Tax is Happy with the Current situation.

    An Educated Workforce will Bring Jobs regardless of any reasonable Business Tax Rates. There is No Line into Nevada of ANY highly Paid Corporation wanting to Come here from anywhere on the planet.

  15. My child came home from school about 2 wks. ago stating that all students might get iPADS next year. While I thought it an impossibility, I filed it away to the back of my brain. I happened to be delivering something to my child at school a few days later & was in the school office when 2 reps from Apple came in for their scheduled appointment with someone at the school. I went home, & began to investigate & found that McGraw-Hill recently created the ibook textbooks for iPADS. When I discovered that McGraw-Hill was also one of the major corporations behind the "Common Core State Standards", I realized the fix was in.I was happy to see that Mr. Ralston was already discussing the Apple issue because I do not enjoy being called a "conspiracy theorist".

  16. Also, please read "How to Destroy Education While Making a Trillion Dollars", by Robert Freeman, published on April 29, 2012, by www.commondreams.org. This article describes the current plan being implemented in NV. It looks like we've been suckered in more ways than one. Now I can see why they claim the sun always shines in the Governor's office & why he thinks he has the best job in the country. Glad to know it's something other than cutting funding for social services to the elderly, sick, & poor. I don't see how anyone could be happy doing that.