Nevada Attempts to Capitalize on California’s High Taxes
Nevada is running another series of advertisements which attempt to woo California’s businesses to their state. Advertisements released this last week mock California legislators.
Nevada is running another series of advertisements which attempt to woo California’s businesses to their state. Advertisements released this last week mock California legislators by showing them as a monkey (actually an orangutan to be more precise).
The current ads prey on vulnerability identified in a recent survey of CEOs. In its sixth annual report, the May/June 2010 edition of CEO Magazine reported the results of its survey of over 650 chief executive officers regarding how all 50 states rank as to its business conditions. For the second year in a row, California was dead last.
Nevada also had some hard-hitting ads last year. They included some “apples to apples” comparisons in which taxes were compared. But 2009 also had some monkey ads. Here is another:
Income taxes are a big deal to any owner-operator of a business. For almost any successful business, income taxes are one of the largest expenses of the business and business owner. Governor Arnold Schwarzenegger's California State of the State Address in January 2010 highlighted California’s vulnerability to this type of attack and the importance of income taxes in the overall equation. The Governor stated:
“The basic problem is that our tax system does not reflect our economy. In 2009, California's economic growth declined only by 2.8 percent but our tax revenues were down more than eight times that much.
Our economy is diverse, whereas our tax system is not; 144,000 taxpayers pay almost 50 percent of all personal income taxes. Now, think about that -- 38 million Californians have to rely on 144,000 people for their schools, their fire protection, their health care, their public safety and so many other services. That makes absolutely no sense.”
The federal government is in a similar situation, where 2% of the population pays 40% of the income taxes. The percentage of income taxes paid by the affluent will increase once 2011 federal tax changes occur. But, back to California …
A mere 144,000 people could walk away with their pocketbooks and tax returns, and California would really have a problem. If even a meaningful portion of these people decide to retire, invest in tax-free bonds, or move out of the State, California will be even more bankrupt than it is now.
It is difficult to move a business, so it is not clear how many jobs are lost to Nevada or other states from businesses moving. However, inventors, authors, retirees and others with large incomes find it relatively easier to escape California’s income tax. For example, this article discusses a California Litigation Loss Involving Its Tax Jurisdiction and Related Residency Audits.
Nevada could use the help. Nevada is one of the few states with an unemployment rate even worse than California’s.
Mr. Nolte has 30 years experience in financial and economic consulting. He has served as an expert witness in over 100 trials. He has also regularly served as an arbitrator. Mr. Nolte has achieved the following credentials: CPA, MBA, CMA and ASA.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.