Teachers, Apples, and China’s Competitive Advantage

(Todd Taxpayer Bailey) – At the opening ceremonies of the 2011 Nevada Legislature, a swift undercurrent could be felt as the veiled speeches for higher taxes began. Central to this demand is more money for education, which is always a goal in most societies and most families. The question for both is always how to pay for it.

Late in the day, a report came across Twitter that Governor Brian Sandoval uses an iPad for e-mail, documents, and most everything else, skipping the now traditional office computer. Seizing the moment, the Las Vegas Sun’s Jon Ralston (Face-To-Face) asked why Steve Jobs doesn’t build a factory here in Nevada? My response was, as it has been for 2 years, ELIMINATE The Payroll Tax. Mr. Ralston was quick to poo poo my observation; however, it is a correct one and easily illustrates the challenge Nevada and the entire country must address.

The iPhone and iPad are developed and designed in California, but both devices are built at the Foxconn factory complex in China. Starting work at 4:00 AM, working 12-hour or longer shifts, employees live under a socialist, military-style environment. The central planning of Communist China keeps a fresh supply of migrant workers available without the burden of regulation, unionization, or the Payroll Tax.

Nevada will NEVER compete with this type of economic model, thank God, and even Steve Jobs was embarrassed when workers started jumping off the factory roof last spring to protest the conditions. Yet, compete we must. But how?

Raising taxes to pour more money into education is NOT the answer, and the Nevada Stale Stakeholder Group is wrong on this point. Nevada is already graduating more people into the workforce than it can employ, with many leaving the state right after college. Should Nevada Taxpayers be investing in the productivity of other states with our graduates?

We can leverage technology to compete with the Foxconn’s of the world, but this new technology also displaces workers and increases the responsibilities of the those who are still employed. This results in new social burdens on society because these workers must find new skills or drop out of the workforce and become dependent on the state. As they drop out, the state loses all the tax revenue they used to supply and now has even more unemployed workers to support. So what is the answer?

Last fall, someone asked Steve Jobs how much the iPhone would cost if he had to build it in the United States. He replied that it would cost $5,000 figuring in the regulations, unionization,  the Payroll Tax, and other taxes that would be required. It was not so long ago that Apple did manufacture its computers in the United States, and a computer that did everything the iPad does was $5,000.

How can Nevada compete with China? We hold up education as the Holy Grail, but that is not how China is out-producing the United States. Remember, the people who do the designing work, the college graduates, are here in the United States. It is the thousands who build the devices in China that form the competitive advantage.

So before Nevada goes spilling an additional billion dollars into education, let’s hear someone from Nevada’s High Education System explain how this influx of money will overcome China’s competitive advantage, and induce someone like Steve Jobs to build a factory here. Otherwise Nevada is simply investing in the productivity of other places, and our children will move there. Is that good for Nevada?

So far, nobody has even tried to answer this question, they just want their billion dollars. Unfortunately, nobody has a billion dollars to tax.

(Todd Taxpayer Bailey is publisher of the Capital Chronicle and Chairman of Jobs For Nevada PAC.)