To better understand the state of the state, you have to look outside the state.
The Obama administration has made it clear that economic growth is not a policy priority – and even if they decided to move jobs to the front of the queue, ahead of gun control, immigration reform and making energy more expensive, they wouldn’t have the slightest idea how to get companies hiring again. “The private sector is doing fine,” “You didn’t build that,” and all that.
So states have to do more if they want their residents to prosper. Across the country, Republican governors and lawmakers are plotting bold moves to counter Washington’s wet blanket and make their business climates more competitive. They know that if they don’t follow through, some of their neighbors surely will – and they’ll be left behind.
These days, profitable, expanding businesses are like single supermodels: They have options.
Last week, Kansas Gov. Sam Brownback used his State of the State address to propose cutting his state’s income tax, with the goal of phasing it out altogether.
Nebraska Gov. Dave Heineman went further in his State of the State speech: He called for the elimination of his state’s personal and corporate income taxes, and for wiping out its long list of sales tax exemptions.
“In recent months, I have asked business leaders if they would give up their sales tax exemptions if we could eliminate the individual income tax and the corporate income tax or at least lower the individual and corporate tax rates,” Heineman said. “They want simplicity and fairness. They want a modern tax code that rewards productivity, profits and job creation rather than having their lawyers and accountants spending time mining the tax code for exemptions. Our tax system shouldn’t favor one industry over another.”
Heineman is a bit of a copycat, however. The previous week, Louisiana Gov. Bobby Jindal announced his revenue-neutral plan to end personal and corporate income taxes and increase sales taxes.
“Tax reform will remove administrative burdens from families and small businesses and improve Louisiana’s business prospects, create more business investment opportunities with increased job growth and raise the state’s profile in national business rankings,” Jindal said in a statement released by his office. “The bottom line is that for too long, Louisiana’s workers and small businesses have suffered from having a state tax structure that is too complex and that holds back economic prosperity. It’s time to change that so people can keep more of their own money and foster an environment where businesses want to invest and create good-paying jobs.”
They’re not alone. Not even close.
Oklahoma Republicans want to cut income taxes. On Wednesday, North Carolina Republicans unveiled a plan to eliminate personal and corporate income taxes, increase the sales tax rate and apply it to food and services, and create a 1.05 percent gross receipts tax. North Carolina’s corporate and income taxes are among the highest in the southeast, and the Tax Foundation rates the state among the 10 worst business climates in the country.
The other states mentioned here have something obvious in common: They’re neighbors of Texas, which has no personal or corporate income tax, has one of Tax Foundation’s 10 best business climates, and is growing like gangbusters.
“Look out Texas,” Brownback said. “Here comes Kansas.”
Meanwhile, the impulse to raise taxes that dominates Washington is playing out in states, too – especially states that voted for President Obama. California, Illinois and other economic basketcases are increasing taxes to keep their unionized public workforces happy, squeezing private-sector income even further. Democratic Massachusetts Gov. Deval Patrick just proposed increasing his state’s income tax and cutting its sales tax to wrench an additional $1 billion from its economy.
In Nevada, Republican Gov. Brian Sandoval must work with a Democratic Legislature. In his State of the State speech last week, he proposed a slight reduction in the state’s modified business tax that will exempt a few thousand small businesses from the levy entirely. It’s an awful tax on company payrolls that creates a disincentive to hire and hand out pay raises. Why not eliminate it altogether, as some lawmakers and businesses have suggested, and as recommended by a new Nevada Policy Research Institute study, “The Path to Sustainable Prosperity”? Replacing it with a tax on services might compel more businesses to hire and reduce the country’s worst unemployment rate.
Nevada Democrats want to go in the other direction. In the Democratic response to Sandoval’s speech, Senate Majority Leader Mo Denis of Las Vegas made it clear that businesses in Nevada don’t pay enough taxes. And if the Nevada State Education Association wins an appeal before the Nevada Supreme Court, next year voters will be asked to approve a poorly structured 2 percent margins tax that will hit even businesses that lose money.
This is supposed to make Nevada more competitive in retaining and attracting business? Other states get it: Prosperity results from a vibrant employer base, not government services. Trying to significantly expand government at the expense of Nevada’s existing, struggling businesses won’t help Nevada’s sales pitch.
If you want to date a supermodel, don’t ask her to pick up the tab.
Glenn Cook (firstname.lastname@example.org) is a Review-Journal editorial writer. Follow him on Twitter: @Glenn_CookNV. Listen to him Mondays at 4 p.m. on “Live and Local with Kevin Wall” on KXNT News Radio, 100.5 FM, 840 AM.