(Michael Chamberlain/Nevada Business Coalition) – You wouldn’t believe it by listening to the government unions and left-wing activist groups who’ve been trying to dominate the conversation in Nevada but it turns out that increasing the burdens on business doesn’t actually encourage them to come to your state. It may sound crazy but raising taxes and increasing regulations may actually force some of those already there to leave.
Earlier this year, Illinois raised its income taxes to close a budget deficit. Last week the President and CEO of Caterpillar wrote a letter to the state’s governor indicating his company may consider exiting Illinois.
In a letter sent March 21 to Gov. Pat Quinn, Caterpillar chief executive officer Doug Oberhelman said officials in at least four other states have approached the company about relocating since Illinois raised its income tax in January.
“I want to stay here. But as the leader of this business, I have to do what’s right for Caterpillar when making decisions about where to invest,” Oberhelman wrote in the letter obtained Friday by the Lee Enterprises Springfield bureau. “The direction that this state is headed in is not favorable to business and I’d like to work with you to change that.”
Earlier this year Amazon.com and Overstock.com also announced they would be leaving Illinois after lawmakers imposed taxes on Internet sales. While many politicians and activists would like to argue otherwise, there is only so much any business can take before the increased costs due to taxes and regulations become unbearable. The recent tax increases were the straw that broke Caterpillar’s back.
Oberhelman didn’t single out any specific problem with the state’s policies in his one-page letter, but [Cat spokesman Jim] Dugan said the recent income tax increase — signed into law by Quinn in January — played a significant role in triggering the note.
Caterpillar is not certain to leave Illinois. If history is any guide, the state will likely offer Caterpillar some incentives to stay – incentives not available to other companies and which may have the effect of increasing the burden on smaller, lower-profile companies.
But the actions of Illinois illustrate that companies really do weigh the costs of taxes when considering where to locate. And there are consequences for states that see business as merely a means of producing revenue for the state government to be plundered at will. That is a lesson Nevada can take.
(Michael Chamberlain is Executive Director of Nevada Business Coalition.)