Same as it ever was

By Jon Ralston

Friday, May 29, 2009 | 3 a.m.

As I listened last week to the apocalyptic pronouncements of a few lawmakers before a $780 million tax increase passed both houses, I had a strange sense of deja vu.

State Sen. Barbara Cegavske called a half-percent increase in the payroll tax a “job killing tax” after spewing other cliche-

ridden arguments she probably wrote in January. Assemblyman Chad Christensen said it was “morally wrong” to enact the tax after he visited businesspeople in his district who were suffering from the economy.

And then I realized where the feeling was coming from: Six years ago. Same place. About the same time. An $830 million tax increase with that new payroll tax as its centerpiece.

In 2003, during what I have called The Great Tax Non-Debate, a handful of senators (yes, Cegavske was there) and the so-called Fearless Fifteen in the Assembly (yes, Christensen was there) provided similarly apocalyptic predictions of businesses fleeing the state or being extinguished by the heavy hand of a — wait for it — 0.6 percent payroll tax.

Shockingly, none of that happened and six years later, the Republicans have fewer seats in both houses of the Legislature. Now who could have predicted that?

Indeed, one of the greatest similarities is the comments then and now from business leaders after the passage of the payroll tax creations/increase — notably less hysterical than lawmakers who (both times) failed to stop the enactment of the tax to fund essential services such as education and health care.

“I don’t see how that’ll affect things much,” Michael Newman, an investment broker with Colliers International, said in 2003 after the payroll tax was enacted.

“We still have low taxes. No, it’s not a no-tax environment,” echoed Ken Ladd, president of U.S. Bank in Nevada and at the time the head of the Nevada Development Authority. “We’ll overcome that. There’s still a whole lot of reasons to do business in Southern Nevada.”

But what about now? That payroll tax has been doubled and business license fees also have increased 100 percent. Is this the beginning of the flight of Nevada businesses? And to where? California?

The most striking aspect of The Great Tax Non-Debate of 2009 was the muteness of the various business groups in opposing what Cegavske insists will destroy the economy and Christensen finds morally repugnant. Is it possible that this time the minority GOP lawmakers know something that successful businesspeople do not? Doubtful.

One of the reasons the business cohort kept its collective mouth shut was because the main agenda for the chamber set was to start pulling back on public benefits many members see as the real threat to their bottom lines in the future. If the state is forced to pay out more than it has in the next few decades, who do you think the Gang of 63 will come after to find the money?

Other groups — the retailers and manufacturers, for instance — were thrilled (as they were in 2003) that any real business tax was not passed. No corporate profits tax. No sales tax on services. And, of course, no resurrection of the dreaded gross receipts tax, which they all insisted six years ago would have turned Nevada into a, well, desert.

The fact is — and it is a fact — that even after the doubling of the payroll tax and the business license fees ($100 to $200 and no per location charge for major outfits), Nevada is still a wonderful place to do business — or at least will be when the economy rebounds. Paying a little more than 1 percent on your workforce if you have more than $250,000 in payroll doesn’t seem likely to dissuade anyone from coming here or inducing anyone to go elsewhere.

No one ever seems to want to put this in context, but the chamber types know it and know how lucky they are: Most other states have corporate income or gross receipts taxes on business. And even though many of those economies do just fine, the thought of imposing one here is always treated as some kind of doomsday harbinger.

The real story, along with the myth of economic diversification, is that generally in Nevada we get the businesses we pay for.