This is happening because the California Pols are cutting off their nose to spite their face.
The Nevada Jobs Machine
A low-tax environment is equating to hot employment in the desert.
NRO
By Greg Kaza
Are tax rates a factor in job growth and economic development? Nevada, which does not levy a state corporate or individual income tax, has recorded the highest percentage employment growth in the U.S. for the second consecutive year. Coincidence?
Total Nevada nonfarm payroll employment expanded 4.8 percent in 2004, according to data recently released by the U.S. Bureau of Labor Statistics. And the expansion is heating up in Nevada. Last year’s blistering employment growth was actually higher than in 2003 when Nevada’s labor market led the nation at 3.9 percent.
Capital investment isn’t fleeing to Nevada because of all that water in the desert. Factors influencing any state’s robust economic development include the rule of law, infrastructure, presence of a skilled work force, consistent regulatory policy, access to markets, and favorable tax rates.
Nevada’s lack of a state corporate or individual income tax has attracted capital from states like California, Arkansas, and Michigan. California has a top corporate rate of 8.84 percent and an individual rate of 9.3 percent — rates that are noticeably higher than the state’s desert neighbor. The Golden State’s labor market expanded at a much lower rate of 1.1 percent in 2004. Tax rates in Arkansas on capital investment are among the highest in the South. That state’s job-creation rate barely budged last year while the U.S. economy created 2.2 million jobs.
Michigan has an abundance of water and natural resources — and a crippling “single business tax” levied by a political class that doesn’t get it. It is also the only state to record net job losses for 4 consecutive years (2001-04). (Final data for Ohio will not be available until March.)
Overall, Arkansas and Michigan were among states with the worst job-creation records in 2004.
Nevada, meanwhile, was among the 10 states that began 2004 with the most business-friendly (and, hence, job-producing) tax systems, according to the nonprofit Tax Foundation in Washington, D.C. Another business-friendly state without a corporate income tax — Washington — ranked sixth in job creation at 2.4 percent.
By contrast, Arkansas was among the 10 states with the least hospitable business-tax climates, and ranked 43rd in the Tax Foundation survey, which ranked Michigan 36th and California 38th.
The Tax Foundation found that the worst state tax codes tend to feature complex, multi-rate corporate and individual income taxes with above-average tax rates; above-average sales-tax rates that don’t exempt business-to-business purchases; complex, high-rate unemployment tax systems; and high overall state tax collections with few tax or expenditure controls.
Nevada’s simplified tax code, however, is a proven job-producing winner. Nevada’s labor market has been so strong in recent decades that the “metropolitan statistical areas” (MSAs) of Las Vegas and Reno have actually recorded net new jobs in periods of recession. Employment typically declines when the economy contracts, yet jobs were added in Las Vegas during the recessions of 1980 and 1990-91, and in Reno during the 2001 recession. Only a small percentage of MSAs nationwide record employment growth during recessions.
A veritable job-creation machine has existed in No Tax Nevada for a long time. Nevada’s economic growth rate of 12 percent has led all 50 states since the last recession ended in 2001. Only one state — Florida — recorded more new jobs (379,000) than Nevada (124,000) in the period. Nevada also led the U.S. in job creation (68 percent) in the record 10-year expansion of 1991 to 2001.
Are tax rates a factor in job growth and economic development? Yes, indeed. Nevada’s yet another case in point.
— Greg Kaza is executive director of the Arkansas Policy Foundation, an economic research organization based in Little Rock.
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