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Sin City on the Potomac Wounds Nevada Bordellos

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
April 7, 2009
Bloomberg.com

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"What happens in Vegas stays in Vegas," the phrase goes. But some things that happen in Vegas are a result of action taken in that other Sin City, Washington.

Nevada has no income tax, and it takes two-thirds of the vote in the state legislature for any new tax to become law. For a long time, such business-friendly policies produced fabulous growth. In 1970, some 6.8 million visitors came to Vegas; in 2007 that figure was 39 million. Population grew 25 percent in this decade alone.

Some might quibble with the quality of growth that's based on an afternoon with a one-armed bandit or an evening soaking up Neil Sedaka. Retail spending doesn't usually yield breakthroughs that can increase productivity and therefore living standards. Then there's our ambivalence about making money off gambling and other forms of sin. Prostitution isn't legal in Las Vegas, but it is in rural parts of the state. Recently a state senator, Bob Coffin, talked up legalizing and taxing prostitution in Las Vegas.

While the state's racier businesses serve as a draw, a big share of Nevada's job creation comes from booze, food and hotel rooms. Nevada's prosperity also has enabled it to help the rest of the nation. According to the Tax Foundation, Nevada gets back from the federal government far less than it sends to Washington in federal taxes -- unlike, say, virtuous Utah, which has, historically, been a net taker.

The economic slump hit Nevada hard. The number of visitors dropped sharply last year.

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