Nevada launches ad campaign to get firms to leave California

The TV commercials tout Nevada's lack of corporate and personal income taxes.

By Alana Semuels, Los Angeles Times
June 11, 2010

Nevada released a series of television ads Thursday mocking the California Legislature in an attempt to lure businesses from the state.

It's the latest effort by Nevada's development authority to woo Golden State companies. This time around, the commercials portray California lawmakers as talking orangutans.

"Las Vegas is driving me bananas taking business from California," says one primate (with the help of a human voice-over). "Please don't go."

The spots tout Nevada's lack of corporate and personal income taxes, calling the state the "capital of the new mega-West."

For years, business leaders have alleged that California's business climate drives companies out of state. Labor and environmental regulations make it costly to do business here, they contend.

"Businesses are leaving the state — they go to Texas, Illinois, New York," said Jack Kyser, an economist for the Los Angeles County Economic Development Corp., which works to make the county more business-friendly.

But other data show that business relocation has a minimal effect on California's economy. The number of jobs lost because of business relocation each year — about 11,000 — is "relatively inconsequential," according to a 2007 study by Public Policy Institute of California, a nonprofit and nonpartisan think tank.

Most employment creation comes from start-ups or the expansion of existing establishments, while most job losses are the result of companies shutting down or shrinking operations here.

"Relocation accounts for very little job creation or job loss," said Jed Kolko, associate director of research at the policy institute.

The threat of relocation is strongest in places where companies have only to move short distances and can keep most of their existing workers, he said. But in California, little business activity takes place near state borders, so that's not practical for most firms.

"California and other states put a lot of effort into encouraging businesses to move in and prevent businesses from moving out," Kolko said. "But it's true in California and elsewhere that very few businesses actually move across state lines."

There are some benefits to doing business in California. With more than 38 million residents, the state boasts the nation's largest consumer market. Corporations pay relatively low property taxes thanks to Prop. 13. They also benefit from a large tax credit for research and development.

A recent study from the Council on State Taxation found that businesses pay 40.7% of all state and local taxes collected in California — a lower share than in Nevada (49.9%) and Texas (61.2%).

One reason Nevada is going ape to get California's businesses: It needs them. Nevada's unemployment rate in April was 13.6%, higher than California's 12.7%.

alana.semuels@latimes.com

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