The critical elements for a pro-business climate encourage entrepreneurs to seek out states that are deemed conducive to business growth and success. The challenge for some states is the inability to define a pro-business environment. The typical knee-jerk response falls within the parameters of regulation, incentives, taxes, and infrastructure support. However, one might argue these items only serve as the foundation. An environment conducive to business growth includes a strong and flourishing community social system. Others cite the importance of a skilled and diverse workforce along with a streamlined legal and tax framework. Naturally, taxes and other government subsidies are influenced by politicians, many of which, claim to be pro-business. However, their definition of pro-business is not always precise.
A healthy business community is vital to job growth, an increase in products and services, competition, and ultimately a better standard of living. A simple goal with clearly defined and measurable results. However, there are two different avenues a politician could take to bring more business to a state. The first and most ideal is to treat the economy like a national park. The politician acts as the forest ranger and makes sure nothing hinders business growth and the economic freedom which occurs naturally. Nevertheless, most people are more familiar with the second approach; referring to lawmakers that treat the economy as a machine and view themselves as machine operators, trying to manipulate a pro-business environment by pulling levers and pushing buttons. Usually, these are a collection of subsidies, incentives for particular firms or industries, and tax breaks. Some argue that politicians do more to stand in the way of business growth than to advance it. There are several repercussions to the second approach.
Significant problems arise when politicians try to create jobs through handouts
For example, let’s say to encourage a tech company to build factories in the state, the Governor of Nevada offers incentives. Such as the reduction of burdensome taxes and eliminate unnecessary regulations to create a more level and open playing field. At first glance this approach makes sense, assuming the goal is to create jobs. What is not automatically considered are issues like opportunity cost. To pay the special handouts, the money has to come from somewhere else. Either taxes have to be raised for everyone, or the funding for public services such as law enforcement and others vital to the community will decrease. The practice is also anti-competitive. When one company receives special privileges, it has an unfair competitive advantage over others, particularly small businesses who cannot take advantage of the same benefits. Since small business owners are not able to compete on the same level, not only are they not able to reinvest in their business, but job stability becomes threatened. Furthermore, the social cost may far outweigh any immediate gain. The news of the special provisions and deals with favored companies may spread discontent causing people to feel the government is only interested in serving the needs of special interests. If a politician is claiming to be pro-business, take time to ask the tough questions because their definition may surprise you.
Businesses are attracted to Nevada’s current business environment
According to a report released by U.S. News, Nevada is ranked in the top ten as one of the best states for its business environment. At 7th the silver state is home to the infamous Las Vegas, which has drawn over millions of visitors in just over 100 years. Known for its libertarian laws, Nevada continues to experience an influx of companies from California because of oppressive taxation. In fact, the silver state ranks number one for individual income tax, and their corporate tax rating is at 33. The business-friendly environment attracts entrepreneurs looking to start and expand their business to a more tax-friendly state.
It is vital to the livelihood of all Nevadians, for politicians to allow the free market room to grow, create jobs, and stabilize the state’s economy. Compared to 2014, the state ranked number one in the categories of Corporate tax, taxes on businesses, and individual income tax. The various reasons for the change in the rankings are beyond the scope of this article. However, it’s possible that policies proposed by politicians are the culprit.
The pro-business environment in Nevada values excellent service to residents and businesses. The process for permitting, licensing, and inspection is both cost-effective and efficient. Increased costs are associated with elongated filing rules and fees, which adds to the costs of doing business. The middle class is the hardest hit during a recession customarily spurred on by business cutbacks, downsizing, and layoffs. All of which leads to more people relying on social services to maintain some resemblance to a familiar lifestyle. Social services should be utilized to inspire self-sufficiency, and incentives for low-wage earners to improve their education, not generational reliance.
Although it’s not always easy to track the total impact of special favors and incentives politicians offer to attract business, sometimes the long-term adverse effect is not worth the immediate return. Politicians should work together to improve the current pro-business environment, not decimate it. Since, lack of educational investment, inadequate health care, and the disenfranchisement of the public threatens the confidence of a pro-business climate.
By Jireh Gibson