Sebelius argues raising taxes won't hurt Nevada businesses
Do higher taxes hurt businesses? Not according to liberal Review-Journal columnist Steve Sebelius.
If low or no taxes attracted business, Nevada would be booming and California would be languishing. Instead, it's the opposite.
This isn't the first time Sebelius has tried to argue that Nevada's businesses would do just fine paying higher taxes.
Argument 3: Higher taxes will undercut efforts to lure businesses to Nevada. This canard just won't go away, despite the fact that it's manifestly false. Nevada has had lower taxes than all its neighbors for years, and is one of just three states with no corporate income tax at all. If this argument were true, Nevada would be teeming with a diversity of business instead of being the unemployment capital of the country.
Sebelius commits the same error in both arguments, so let's dissect his logical fallacy.
Instead of examining the effect of taxes on businesses in a vacuum — i.e. holding all other factors equal — Sebelius compares two states that are different in thousands of ways. He then plucks out one factor (taxes) and attributes the economic differences between Nevada and California to that factor alone.
Let's use an analogy to show how misguided Sebelius' argument is.
Imagine that, on Jan. 1, John — going as fast as he could — ran two miles in 20 minutes. On Jan. 2, John started smoking a pack of cigarettes a day. On March 1, John ran two miles in 18 minutes.
Does that prove that heavy smoking increases cardiovascular endurance? It could ... using Sebelius' logic.
But it's important to get the whole story. What other factors changed?
On Jan. 2, John also started running five times a week, eating better and getting a full night's sleep.
Even though smoking hurts cardiovascular endurance, a person can run faster while smoking because of positive things he is doing to offset negative factors.
In the same way, a high-tax state's economy can grow faster than a low-tax state if other factors offset the negative impact of high taxes.
So, let's go back to taxes. If every other factor were equal, would a business want to be in low-tax or high-tax state? The answer is obvious: the low-tax state. It's even true for many liberals who call for higher taxes and then exploit tax loopholes to avoid paying taxes themselves.
So are California and Nevada the same in every aspect but tax rates? Hardly.
|
California |
Nevada |
|
|
37.7 million |
Population |
2.7 million |
|
45% |
Government |
85% |
|
Usually |
Weather |
115 degrees |
|
840 |
Miles of coastline |
0 |
|
Numerous |
Established industries |
Gaming, Mining |
|
48th |
8th grade NAEP |
47th |
|
Higher than NV |
Taxes |
Lower than CA |
These are only seven of the thousands of areas where California and Nevada differ substantially.
The question policymakers should be asking is, "Why would anyone want to leave a state with amazing weather, hundreds of miles of beaches, and a huge economy?”
For many, like Phil Mickelson and Tiger Woods, the answer is high taxes.
Why would anyone want to implement the very thing — higher taxes — that is driving individuals from a state with great weather and other significant natural advantages, especially when Southern Nevada is in the middle of the desert?
