Potential for higher taxes scares businesses

Up in Carson City, Nevada legislators talk a good game about diversifying Nevada's economy.

But a new scorecard from Indiana's Ball State University -- the 2011 Manufacturing and Logistics National Report -- gives Nevada an "F" in manufacturing; a "D" in logistics, human capital and global reach; and a "D+" in diversification.

Some of that can't be helped. Nevada isn't likely to develop a major seaport anytime soon, nor to rival the college-educated, high-tech work forces of Massachusetts or Silicon Valley. But interestingly enough, those compiling the report listed an unexpected factor as a major concern for those thinking of locating a manufacturing facility here: the Nevada Legislature.

It doesn't seem to have escaped the attention of the Ball State researchers that Nevada's lawmakers have enacted record-breaking tax increases several times in recent years -- and that many still voice a desperate hunger to do so again, even at what is arguably ground zero of the nation's ongoing economic malaise.

Nevada's tax climate, once a point of pride, received a "C" grade, according to Michael Hicks, director of the Center for Business and Economic Research at Ball State.

What stood out in the nationwide survey was a feeling that Nevada's declining property tax revenue is going to hurt the chances of recruiting more manufacturing, said Mr. Hicks. "Given what happened in the housing market, the expectation that you can maintain taxes at the current level is optimistic," he said, clearly meaning that he expects rates to soar. "There's going to be a time in the next few years where you face some very difficult choices. It means a really tough environment for schools."

Nevada unemployment insurance and sales taxes are both high compared with the rest of the nation, admits Somer Hollingsworth, president and chief executive officer of the Nevada Development Authority, though he does dispute the state's overall "C" rating on current tax climate.

"We always rank at the top of the country. We've got a pretty good reputation around the country as a place you can do well in manufacturing," Mr. Hollingsworth protests.

But state and local tax rates -- along with the quality of local public goods -- are among the biggest concerns for relocating companies that can land virtually anywhere, says Mr. Hicks. And survey participants seem to believe that Senate Majority Leader Steven Horsford, Assembly Speaker John Oceguera and other Nevada legislative leaders mean to continue doing the bidding of the teacher unions when it comes to blocking any meaningful school reforms.

Instead, the businessmen seem to realize, the current gang in Carson City has no plan but to "throw more money at the problem," finding new veins to open in order to suck more of the lifeblood out of local private businesses.