Economic Development: Roadblocks

Taxes (wheel of Fortune) aren't the answerPlatte Chat that came to me courtesy of the Objective Conservative, which outlines many of the tax problems which are holding Nebraska business back.

As Nebraska state senators continue to figure out whether to reform the state’s tax system and while Nebraska’s lame duck governor fights to eliminate the income tax we get a favorable view of doing so from our friends at the Platte Institute.   

Whether it is practical for the state to entirely eliminate the income tax, reform reducing its high tax rates is imperative if the state is to continue to compete fore new business.   The Platte Chat article below well supports the need to do something.

The Key to Attracting Businesses

“Earlier this year, Texas Gov. Rick Perry made headlines for a bold advertising strategy aimed at four states with notoriously bad business climates: California, Illinois, New York, and Connecticut. Perry invited businesses there “to hit the emergency exit” and make a break for Texas.[1] While officials in these states dismissed Perry’s audacious campaign as little more than a stunt, Texas’ incredible success at creating new jobs demonstrates that it is more than just talk.  More people and businesses are voting with their feet to go where taxes and regulations are lower.
The success of Texas-which has no income tax-is clearly evident. In 2012 CNBC ranked Texas as the best state for business in the nation-overcome in 2013 by another no income tax state, South Dakota-and in 2013 Forbes placed seven Texas cities in its list of “Best Cities For Future Job Growth” with the top four all being from Texas.[2] In contrast, California, which has the highest income tax in the nation at 13.3 percent, was ranked 47th in CNBC’s 2013 poll and only saw one city-Santa Cruz-in the Forbes “Best Cities” list.[3]
Aside from rankings, Texas’ success in creating jobs is in the numbers. Despite accounting for only 8.4 percent of the United States’ population, Texas accounted for 43 percent of the jobs created between February 2009 and May 2013.[4] Over the past five years, Texas has added 889,685 jobs, including 303,000 in the past year alone, much more than any other state. Compare that to the high tax states of California, New York, and Illinois, as the Golden State-despite a larger population-added only 119,659 in the past five years, and New York and Illinois together lost 568,195 jobs over the same time period.[5] A 2010 article in The Economist even noted that the average New Yorker or Californian could take home between 9 and 11 percent more of their income by relocating to Texas.[6]

Continue reading Objective Conservative – The Voice of Conservative Thought in Nebraska: Nebraska Needs Tax and Regulation Reform.

Nothing in this article strikes me as wrong, in fact much of it is completely correct, and might well do a lot of good, in Omaha and Lincoln, and maybe marginally in Grand Island as well. While it won’t hurt the rest of us, I think, it’s not going to help much either. Why? Because taxes aren’t our major problem. We have other, structural problems, let’s talk about them a bit.

The big one is this: Corruption, It comes in two flavors, state and local. Let’s start with state.

Most of you know I’m an electrician, so that what we’ll talk about. Between Grand Island and Ogallala there are maybe 6 electricians that can efficiently troubleshoot industrial controls. I know 4 of them, 2 well. Good men that I would recommend to anybody. The only problem is that you’ll wait 3-9 months for them to get to you, if they’re even accepting new clients, that’s how busy they are.

Actually I know one more, me. I don’t practice though. Even though I have 40+ years of experience.Why? it’s very simple. Nebraska requires four years of experience to take the Journeyman test, the law provides for an apprentice card but, many of us out here worked on agricultural machinery (center pivots and grain handling systems) exclusively, which didn’t require licensing. Parenthetically, I’ve been here about 25 years, before that I lived in Indiana which has no state license. So, I never had an apprentice card, never needed one.

I called down to the state when I decided I wanted to branch out into general electrical work, they told me they wouldn’t accept my entire experience, at the time about five and a half years. That’s fine, it made sense, I hadn’t done residential in years. We settled that they would count two and a half years. So I hooked up with a Journeyman friend of mine who was on track to get his contractor license in about one-two years. Because I’m dumb and wasn’t doing much field work, I still didn’t bother with the stupid card.

Anyway what with one thing and another, by the time we got around to building in a job that would require us both, I was up to about six years including the agreed upon 2.5 from before. Since I do all the planning and such, it made more sense for me to take the contractor’s test, which would let me pull our permits. That requirement is five years. So, since an EC has to sign for you to take the exam, my EC buddy called down to make sure we were all on the same page. He was sitting in my office when he did and I could see the shock on his face.

The NSEB decided it wasn’t going to accept any of my experience, and they further threatened to lift his Contractor license just for asking. Luckily he was (and is) working for one of the ten largest electrical electrical contractors in the country so they didn’t quite dare try that. And that’s the story about why I have time to talk with you most days. I’m one of probably the 24 best electricians in the state, but because of *whatever* I’m not allowed to practice. And yes I’m too old, and crotchety to do another 4 years with some stupid 24 year old. I’d rather go on welfare than work for peanuts again.

Meantime there’s a factory less than a mile away from me, designed for medium manufacturing, I’d guess a few hundred thousand square feet, it’s been empty since the company moved it to Mexico, and then on to China. Very nice physical plant, I doubt it will ever be used again, even though the work force is still here, to set it up you’d need industrial mechanics, electricians (like me), pipefitters, and other industrial trades. Don’t forget to bring them with you. In any meaningful sense, they no longer exist here.

That’s part of the problems with the state, let’s talk about local for a bit, and then we’ll quit for today.

The Journeyman I spoke of earlier when he was planning to start this business before I was involved, figured he needed a shop and some storage, and maybe an office. He found a light manufacturing lot in another town, with a couple of quonset buildings and a small frame office, a bit run down but fixable. At the time he was living in a mobile home, and figured it reasonable to put that on the lot as well (it’s plenty big). So before he even bought it, he applied for a special use permit that would allow him to place his mobile home on the lot (it’s adjacent to a residential, although not fancy, area). He did the whole nine yards, talking to the neighbors, posting signs, whatever. So he was pretty confident when he went to the planning committee meeting, especially when no one complained, or even showed up.

So he was rather surprised when the mayor spearheaded a vigorous argument against allowing the permit, which was denied. That’s one thing, although nobody has ever offered a rational reason. The one that should have been a warning (he’s a bit bull-headed) was when the mayor asked the city attorney in open meeting if they could stop him from buying the property, including snide comments about raising goats which bewildered him no end. The answer was no.

So he bought it anyway, he’s had it now for better than ten years. In that time we have been cited for everything you can think of, including leaving material on trailers in our lot, which is zoned for outside storage. It has become completely impossible to function in that town, and so it’s sitting dormant, costing us money (although less than renting storage space for our stuff).

A good part of where we get whipsawed is that the city has it zoning code, which is reasonable, actually (or would be if properly enforced) it also has the International Property Maintenance Code which it enforces when it feels like it. By the way, you should read that code, it exists in most states and basically what it amounts to is that you will use your property exactly as the state and/or city says you will, not to mention that you will let their official into any or all of your property at any time, and yes it applies to your house as well.

Next time:

Solutions

 

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About NEO
Lineman, Electrician, Industrial Control technician, Staking Engineer, Inspector, Quality Assurance Manager, Chief Operations Officer

4 Responses to Economic Development: Roadblocks

  1. I have an idea that would create millions of jobs and restore our manufacturing base. NEW LAW – “If you sell it here, you gotta make it here.” This would still allow foreign investment and foreign profit but keeps the jobs here. Once more people have money in their pocket again they start buying things which puts more people to work making things for them to buy and the whole economic engine begins a dramatic upward spiral.

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    • NEO says:

      Perhaps, Carl, although you do realize that was the argument for the Smoot-Hawley Tariff as well.

      I think we can outcompete anybody in the world, in manufacturing or anything else, but not while we’re spending 50%+ of our time arguing with the government over non relevant stuff. We need the government to get off our backs and let us run. Then you’ll see the 1920s only more so.

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  2. mikekapic says:

    I empathize with your struggles to work and fight the bureaucracy at the same time. Because crony capitalism is so invasive, I’m curious if you suspected union influence was at the core of the rules?

    MIke

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    • NEO says:

      Here no. We have nearly no union at all in the economy, there just was never enough industrial activity for it to work.

      What we have here has more to do with families and relatives, sort of an extended nepotism.

      But I grew up in northwest Indiana, there it was indeed a factor. In addition the licensing thing is almost more like a medieval guild than anything else, the ECs control who practices.

      Thanks for commenting.

      Like

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