If Nevada were really trying to catch up to other states, if it were really serious about creating an environment for future prosperity and opportunity, then Question 3 on November’s ballot would seek to cut taxes, not raise them.
Question 3 is the 2 percent margins tax initiative placed on the ballot by the state teachers union. If voters approve the question, an estimated $750 million per year would be taken out of the recovering private sector at the expense of business job creation, just as Nevada’s economic development efforts are becoming better coordinated and more productive.
The mere prospect of such a punitive tax becoming law in Nevada puts the state at a competitive disadvantage in its pursuit of new industry and investment. Across the country, states are raising the stakes in luring companies — and fending off outsiders intent on plucking top employers — by cutting taxes.
— This month, Rhode Island’s corporate income tax rate fell from 9 percent to 7 percent.
— Also this month, Indiana’s corporate income tax rate fell from 7.5 percent to 7 percent. The rate will drop again next year, to 6.5 percent. Indiana’s personal income tax rate will fall from 3.4 percent this year to 3.23 percent in 2017, and the state abolished its inheritance tax.
— Last month, Ohio Gov. John Kasich signed into law several tax cuts, from deductions for small businesses to an income tax cut to an expansion of tax credits for low- and middle-income earners.
— Earlier this year, Wisconsin Gov. Scott Walker signed into law property tax cuts and income tax cuts.
— Last year, about 20 states enacted at least one tax cut. Nevada was one of them, approving a small-business payroll tax deduction.
And then there’s the list of states offering tax credits and incentives to businesses to set up operations in their states. Nevada is on that list, too, with tax credits offered to filmmakers and Catalyst Fund incentives. This newspaper has long opposed subsidizing some businesses at the expense of others. But the policy flaws of industry tax credits haven’t stopped states from offering them — and netting jobs as a result.
The economy operates under a new set of rules. Growing companies are blue-chip recruits. They have offers from everywhere, and they have the leverage to negotiate the terms most favorable to them. Nevada badly needs more jobs. The state’s real unemployment rate is about 17 percent, including the underemployed and the discouraged.
As reported Tuesday by the Review-Journal’s Wesley Juhl, the state had the 14th-friendliest small-business climate in Thumbtack.com’s third annual survey. Small-business professionals gave Nevada an A-plus grade for its tax code. That turns into an F if Question 3 passes. According to an Applied Analysis study, the margins tax would impose the equivalent of a 15 percent state corporate income tax rate, the highest in the Western region. In the new war for jobs, Question 3 is surrender.
A “no” vote on Question 3 wouldn’t cut taxes, but it would prevent serious damage to the state’s economy and give it a chance to continue growing. Creating a new business tax is about the dumbest thing we could do. Nevada voters can put the state on the right path to economic development and job creation by rejecting Question 3.