Tax abatements: Look at the details

Southern Nevada’s economy has taken a beating over the past five years, so just about any news related to job creation is good news. To that end, the Governor’s Office of Economic Development Board last week approved tax abatements that are expected to create about 330 jobs around the state.

Nine companies — some already established in Nevada, some preparing to expand operations into the Silver State — will split nearly $18 million in incentives. The abatements are expected to increase capital investment in the state by $200 million.

On the surface, it indeed looks like good news for a state with a 9.6 percent unemployment rate, way above the national average and highest in the United States. But delve just a little deeper and you can see why incentives such as these are not going to pave the path to prosperity.

First, the math: $18 million for 330 jobs works out to about $55,000 per job. That’s a huge subsidy for a single job, perhaps more than a year’s salary, depending on the position. Then take that math a step further. Within Nevada’s workforce of 1.37 million, more than 132,000 people are unemployed. How many more $55,000 abatements would be needed to really make a dent in Nevada’s unemployment rate? Far more than taxpayers can afford, for sure.

Second, thousands of struggling businesses in this state could use some relief just to stay open, let alone consider expansion. And these businesses probably don’t need $55,000 per employee to do so. Yet not only are these companies missing out on such benefits, they have to pay full freight so a newcomer — perhaps a competitor — can get a break to move in.

It’s an unavoidable problem whenever government gets in the business of picking winners and losers. Nevada no doubt needs the jobs, and 330 positions will help, regardless of whether they’re open to applicants or taken by transplants. But tax giveaways are not the long-term answer to boosting the state’s business climate and diversifying Nevada’s economy.