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Uncertainty is bad, but so is mediocrity

Everybody at Monday’s UNLV 2014 Economic Outlook presentation seemed to agree that new taxes will produce uncertainty for the business community.

And, as professor Stephen Brown told his audience at the M Resort, that’s not a good thing. “It’s probably not the best time to look at new sources of revenue, simply because it creates uncertainty,” said Brown, who directs the Center for Business and Economic Research. “Things are fragile.”

Then again, some at the presentation also seemed to agree that education needs help, and that help isn’t possible without more money. “There’s a high probability that we need more money for education,” said Glenn Christenson, the former Station Casinos chief financial officer who now sits on the board of the Las Vegas Global Economic Alliance. Brown concurred, saying something must be done to strengthen schools, and that wasn’t going to happen without more money.

But Christenson is also concerned about new taxes in general, and the 2 percent margins tax proposed by the state teachers union in particular. “We could find ourselves in a situation where a margins tax could push us over the edge,” he told the audience.

The speakers seemed to agree on another point, as well: Nevada’s economy needs to get more diverse, whether it’s health care (adding a medical school at UNLV) to logistics to information technology infrastructure, to becoming a center for testing and research on unmanned aerial vehicles, the broader our jobs base is, the sooner our economy will recover from the lasting effects of the Great Recession.

And that leads us to a dilemma: What if everybody’s right? What if we can’t diversify our economy without improving our education system? And what if we can’t do that without new revenue? And what if we can’t do that without new taxes?

Bring on the uncertainty.

On one level, of course, the quest for certainty is a fool’s errand. Tomorrow is promised to no one, and events outside our control — even outside our imagination — can turn our carefully laid plans to dust overnight. All business owners realize they have to face uncertainty as a fact of life and adjust their decisions accordingly. Asking for certainty, predictability and stability is a fond hope, but nobody in the real world can guarantee it.

On the other hand, however, the need to make things as predictable as possible for businesses is understandable. Frequent or radical changes to things fully within our control don’t help attract or retain businesses.

That’s why we need to level with everybody about the margins tax, which will appear on the 2014 ballot: It’s out there, and there’s an even chance voters will approve it.

The uncertainty created by the tax is a byproduct of our political system: Several taxes have been proposed over the years in the state Legislature, but they were rejected, thanks primarily to the assiduous lobbying of the business community. Talk about certainty: It’s always easier to kill a bill than to pass one, and lobbyists have enjoyed the certainty of the slow-moving political process for years.

That leaves only one outlet for the frustrations of those who believe Nevada’s schools badly need more money to succeed: the initiative process, the worst possible way to make tax policy, but the only one left in the face of systemic gridlock and legislative fecklessness.

Certainty may be good for business, but it’s not always a good thing. It’s almost certain that if we keep running our schools the way they’re being run now, we’ll continue to reap the disappointing results we’ve seen up until now. It’s almost certain that if we don’t provide future businesses with an educated workforce capable of performing in new, high-tech jobs, businesses that offer those jobs will continue to set up shop elsewhere. It’s almost certain, then, that Nevada’s economy will remain as it is: dominated by a few industries, always susceptible to the next big downturn.

Maybe what we really need is some short-term uncertainty in order to make things better — and more certain — in the long run.

Steve Sebelius is a Las Vegas Review-Journal political columnist and author of the blog SlashPolitics.com. Follow him on Twitter (@SteveSebelius) or reach him at 702-387-5276 or ssebelius@reviewjournal.com.

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