In today’s Senate Revenue Committee meeting, committee members heard a presentation on the targeted tax incentives given to large businesses who promise to invest in Nevada. The presentation was delivered by Michael Skaggs, Executive Director of the Commission on Economic Development.
Skaggs reviewed state programs for temporary tax abatements pursuant to NRS 360.750. This statute permits the Commission on Economic Development to grant targeted tax breaks to businesses that are consistent with the “State Plan for Industrial Development and Diversification that is developed by the Commission.” (Read: businesses whose lobbyists gain political favor in Nevada.)
NRS 360 allows politically-favored firms to receive special abatements on the local school support tax, property taxes, and the state payroll tax (MBT). These tax breaks are in addition to the rebates that many well-connected firms might receive through tax-icrement financing or STAR bonds.
The ostensible purpose of these abatements is to incentize new business to move into the state and create jobs. However, a report prepared by legislative staff in 2009 revealed that many tax breaks awarded by the Commission on Economic Development completely fail to achieve this purported objective.
In 2006, for instance, the Commission awarded $5.6 million dollars in local school support tax abatements and a 50 percent abatement in payroll tax liability for four years to Solar Star in Clark County. In return, Solar Star hired a single worker who made $21.15/hour.
NPRI has always held that the best method of encouraging job growth and small business development is through a low, but uniform, tax and regulatory burden, combined with a well-functioning education system. Moreover, these two important components are not incongruous, as our friends on the Left would have you believe. NPRI has repeatedly demonstrated, using empirical evidence, that Nevada’s educational system can see dramatic improvements through structural changes that would also imply a cost savings for taxpayers.
Targeted tax incentives create an uneven playing field that disadvantages the growth of native, small businesses to the benefit of politically-connected, large corporations. They also can foster an attitude of corruption and lead to inefficient decision-making.
Moreover, opposition to “corporate welfare” is one policy stance that enjoys widespread agreement from across the political spectrum – from Grover Norquist to Ralph Nader. In Nevada, not only has NPRI remained critical of this practice, but so was former Assembly speaker Barbara Buckley, who admirably fought to curtail this practice in the 2009 session.
Today, Senator Sheila Leslie voiced some concern over the use of corporate welfare in this state. Hopefully, Senator Leslie does not forget this important issue and works to curtail the practice in Nevada.