Nevada small businesses create 3 times the jobs in one year that Faraday will create in 20

Lawmakers consider subsidies for Faraday after hiking taxes on small businesses

By Michael Schaus
  • Tuesday, December 15, 2015
Lawmakers consider subsidies for Faraday after hiking taxes on small businesses
Tax-breaks for Faraday? Someone should ask where the tax incentives are for small businesses

Lawmakers plan to meet in Carson City this week to consider more than $300 million in tax abatements, subsidies and other government spending to lure a private company, Faraday Futures, to North Las Vegas.

The privately held Faraday, owned by a Chinese billionaire, has yet to sell a single car or unveil a business plan.

At a press conference last week, Nevada Governor Brian Sandoval said Faraday would create 4,500 direct jobs over the next 20 years. That, he argued, would justify the handouts to be contemplated at the special legislative session.

While the administration hypes the 4,500-jobs number, statistics from the Small Business Administration provide important context.

SBA finds that in 2012 alone small businesses in Nevada created over 15,000 net new jobs. In just 12 short months, small firms created more than three times the amount of jobs Faraday promises to deliver over the course of 20 years — and all without any special tax subsidies.

Over 95 percent of Nevada’s employers are small businesses, and they employ over 40 percent of the state’s workforce. National statistics confirm this pattern as well, with small businesses producing 64 percent of net new jobs in the U.S.

To increase jobs, policymakers should focus on helping all businesses flourish, not merely a select set of politically connected firms. During the last legislative session, however, politicians passed a $1.5 billion tax hike that raised taxes on every job creator in the state.

So why would legislators consider giving a secretive and mysterious out-of-state company tax breaks and special treatment, while the state’s local businesses suffer from increasingly punitive tax hikes?

The answer isn’t based as much in policy as it is based in politics.

No press conference ensues when a small start-up business grows from two to three employees.

No trumpet fanfare sounds when a garage-based business gets its first retail office location.

Such key drivers of economic growth happen far away from the microphones and the cameras before which politicians love to posture.

Politicians regularly get fawning press coverage for “bringing jobs” to Nevada through tax subsidies and incentives. By the time a project’s actual success or failure is known, however — it usually takes five to ten years — the politicians perpetrating the giveaways have moved on, leaving taxpayers holding the bill.

Maybe this is why such subsidies aren’t that popular among average Nevadans. It’s interesting to note that the general public has thrice rejected attempts to change Nevada’s Constitution to allow subsidies. And yet, lawmakers keep trying.

Behind the Faraday deal is an economic truth: lower taxes do incentivize job creation and economic development. If lawmakers truly want to boost job growth, however, they should extend tax relief to all Nevada businesses, instead of playing politics with subsidies, abatements and handouts.

While lawmakers debate special tax-breaks for Faraday, someone should ask where the tax incentives are for the local mom-and-pop companies that are already creating jobs.

Michael Schaus is communications director of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. For more visit http://npri.org.


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