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Those loose ends can haunt a government

No matter where you stand on the political spectrum, a steady parade of politicians who would lead the nation have likely given you something to cheer – and something to boo – this year.

We’ll leave the political calculations to our brethren at the Review-Journal.

Instead, let’s look at a couple of recent articles that raise interesting questions about what our own Nevada politicians have wrought.

The first was a guest column in last week’s Business Press by Gary Johnson, managing partner of Johnson Advisors. He pointed out a number of things we don’t yet know about the state’s new commerce tax, little details like what the threshold is and how the exclusions will work.

Of course, the clock is ticking for everyone in business. The law took effect July 1 and the one thing that is clear, Johnson points out, is that all businesses will need to modify their accounting practices to capture data on the state’s fiscal year calendar. Never mind that you’ve been working on a calendar year basis since you started the company. Tip it on its head so you can give the state what it wants, even if you are in no danger of owing the tax because your business won’t even approach the seeming $4 million threshold.

Is that cost deductible? Don’t hold your breath.

Then there’s the matter of the petition effort seeking to undo the entire tax at the ballot box in 2016.

So would you like the cost and the tax or the cost and a temporary reprieve on the tax?

It’s just insane for a state government that prides itself on being business friendly to create such havoc. Yet that’s what has happened.

It’s akin to the IRS issuing rules after the fact. Sure, they do it all the time but at least they don’t pretend to be business friendly. You know where you stand.

Then we have a thought-provoking piece by Robert Lang of the Brookings Mountain West at UNLV. He ponders the question of what Nevada can get for a $422 million investment of tax money. On the one hand, he posits, you have 50 upscale technician jobs at a data center or a state-of-the-art stadium that will bring in 20 new events and generate $800 million in revenue. Don’t like the stadium model? OK, how about $422 million toward a light rail system that will improve tourism infrastructure and cut congestion?

Now, Lang and his co-author, William E. Brown Jr., didn’t pick the odd amount of $422 million out of thin air. That’s what Rack Space, a data firm based in Texas, wants in tax incentives to relocate to Nevada. And yes, they’d meet the criteria embodied in state development statutes by investing $100 million and creating 50 jobs.

Folks who work for think tanks like Brookings Mountain West are not accustomed to saying the government is being fleeced but they can ask questions. Sure, the actual cost analysis is a lot more complex. But it’s hard to swap the incremental benefits of 50 computer geeks for the long-term economic benefits of either a stadium or a light rail system.

The Silicon Valley chip manufacturers raised this barter for tax incentives to a high art a generation ago when they circled the globe looking for nations desperate to take a chance on a short-term jump start for their economies. It worked for Ireland but dozens of other countries were left subsidizing a 20-year economic blip on the backs of their own taxpayers.

Which is Nevada’s destiny?

It’s not fair to single out Rack Space. They’re doing what good business does – taking advantage of an opportunity.

And there’s nothing wrong in the intent of a tax plan that seeks to jump start a failing education system or diversify a limited economy. But a little bit more care and attention to detail seems a low bar that the legislature has failed to clear.

When governments can’t get their acts together, it often seems to leave the door ajar for voters to look far afield for an alternative to the status quo. Sometimes it works out; think Ronald Reagan. Sometimes it doesn’t; remember Gov. Jesse Ventura and Gov. Arnold Schwarzenegger?

We’ve got awhile to see who emerges to run for governor of Nevada next. It could get very curious if the 2017 legislature can’t tidy up some of these messes.

 

 

 

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