Las Vegas Sun

October 13, 2015

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Sun Editorial:

An unfruitful policy

Story about Apple’s Reno office shows failure of state tax structure



The offices of Braeburn Capital, an Apple subsidiary that manages and invests Apple’s cash, in Reno. Nevada has a corporate tax rate of zero, as opposed to 8.84 percent levied in California, where Apple has its headquarters.

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Reno, the “Biggest Little City in the World,” is home to one of the biggest tech companies in the world. Not that anyone would notice.

Apple, the tech innovator and maker of the ubiquitous brand of computers and devices, opened a low-profile subsidiary in Reno several years ago called Braeburn Capital. As The New York Times detailed last month, the subsidiary — named after a type of apple that is tart and sweet — has a handful of employees in a small office in a nondescript building.

It doesn’t make any products that will bear the Apple logo, but that doesn’t mean it isn’t important.

Indeed, Braeburn plays a critical role for Apple: It collects and invests the company’s profits. And its location, 200 miles from Apple’s California headquarters, is strategic: The California corporate tax rate is nearly 9 percent; in Nevada, it’s zero.

Apple has diligently and legally worked to minimize its tax bill, and that's great for the company and its shareholders. But is it good for Nevada?

Economic development and taxes have been long-standing issues in Nevada, and they have been long linked here. The prevailing argument, dating back to at least the 1930s, has been that lower taxes would mean a more diverse economy. But if that were the case, wouldn’t Nevada have the most diverse economy in the nation? Wouldn’t companies have already brought tens of thousands of jobs here to take advantage of the tax structure? Wouldn’t we be writing about something else?

Apple’s Braeburn Capital is the fruit of policies based on the belief that low taxes are the elixir sure to cure all the state’s economic ills.

What has happened is that companies like Apple might register here and open a small office or a warehouse to take advantage of the tax structure, but they do little else. Sure, that’s better than nothing, but that’s hardly the way to build or diversify the economy.

The fact is that low taxes haven’t created an economy that is both wide and deep. It takes more than low taxes to grow the economy. It takes the right work force, and that means a good education system, as well as infrastructure and a variety of other things businesses look for.

Of course, it takes taxes to pay for things like schools and infrastructure, but the state’s antiquated tax structure, which is narrow and highly volatile, hasn’t generated the revenue needed.

There’s also the issue of tax equity. A company like Apple can set up a shingle here, provide a few jobs and pay virtually nothing in taxes while established industries, notably gaming, pay significantly more while upholding the economy. How is that fair?

However, despite overwhelming evidence that the state needs a broader tax base, attempts to fix it have been squelched by ant-tax critics, and the Legislature and past governors have failed to adequately address the problem.

Given the problems in the state, the issue shouldn’t be avoided anymore. Nevada needs an equitable tax policy that fits the 21st century and creates the type of state that will attract businesses to move here, not just set up tax havens.

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