The comments here are ignoring the jobs this brings into Nevada. It's like an investment. Tesla gets a tax break because it will provide jobs. The jobs create economic stimulus. People spend more money, leads to economic growth, this is not corruption, this is competing for companies to bring jobs into the state. There is no evidence of personal financial gain for the officials who got this deal to be made. In the absence of evidence, all you have is speculation, based on a misunderstanding of how tax breaks for jobs usually work. So Tesla building this plant is a good thing for Nevada.
Everyone knows that's the idea. But $1.2 billion is a lot of money. how long will it take to make this foregone revenue back in taxes? If there are 6000 employees, they're going to have generate $200,00 each plus interest in tax revenue before the state of Nevada breaks even. Nevada doesn't have a state income tax so it's going to have to get that money back through sales taxes, which means (assuming the top rate of 8.1% in the state) after each of the 6000 employees households has spent about $2.5 million within the state.
Don't hold your breath, in other words. Even with the most optimistic economic multipliers I don't see the state breaking even on this for about 25 years. I think they're gambling on the 'gigafactory' being the center of a manufacturing hub that attracts other businesses to the region, sorta like HP in Silicon Valley back in the day. Perhaps they'll call it 'Lithium Oasis' or something if it works out.
I'm neutral on this, and I hope it works out for them, but it's not the sure thing you suggest. Companies that get huge tax breaks sometimes crowd out other employers that were willing to do a better deal, only to up sticks and leave as soon as the tax break expires. I'm not saying Tesla will do this or that they shouldn't seek the best deal, just that it's not guaranteed to be a long-term benefit.
The state isn't writing Tesla a 1.2B check. It's not like the state is starting out in a -1.2B hole. They're starting from a slightly negative and almost 0 position (some amount of state resources went to negotiate the incentives). They have almost nothing to lose and everything to gain. It's a tax incentive which means in order for Tesla to benefit, they would have to have developed property to pay property taxes on (which is good for the state), and had net income to offset (which again is good for the state). In very rare scenarios, some of the states resources are used and Tesla pays 0. In most cases, the state can only win in a deal like this.
Not to mention, there are now 6500 new jobs, and 6500 additional middle-income wage earners paying taxes that the state never had to begin with.
But if they hadn't given any tax breaks at all, Tesla wouldn't have gone to Nevada. Which means that the full 'foregone revenue' was never an option on the table in the first place.
Consider the middle ground. Tesla were looking for about $500m of incentives, and got a lot more than that. Now if the projections pan out it may work out very well for the state but it could end up as a white elephant, as these deals sometimes do. Also, consider that about 10% of this is coming out of reduced incentives for other industries, who will now presumably invest less in Nevada than before: http://www.rgj.com/story/news/2014/09/04/nevada-strikes-bill...
Yes, it is a good thing for Nevada in that it is better for them than if the plant was built in California. But, it is a bad thing for the country that businesses of a certain size are able to extract this type of concessions from states.
See also: why are professional sports teams able to force cities to pay for their stadiums? If the federal government disallowed this type of interstate competition, the factories and stadiums would still get built but their owners would pay their fair share in taxes.
Yep, everyone who's bought something "Made in China" should know about how job-producing factories can and will move to the cheapest location.
Nevada giving incentives to have a factory built is no more corruption than tariffs to protect imports/exports is corruption. You can argue if it's a good or bad thing, but it's definitely not illegal nor should it be illegal.
>You can argue if it's a good or bad thing, but it's definitely not illegal nor should it be illegal.
That doesn't make much logical sense. If you think it's a bad thing you would want it to be illegal so that it doesn't happen. Just like if you think tariffs are bad that they should be illegal.
Maybe not illegal in the criminal sense, but illegal as in regulated to not be allowed makes perfect sense.
If every "bad" thing should be illegal, then tobacco, alcohol, marijuana, prostitution, lobbying, protectionism, should be banned. Then again, we have to argue what is "good" or "bad".
We have federal taxes that are supposed to pay for general national welfare. Beyond that it is not clear why the state of California "deserves" to collect taxes more than Nevada, which offers more for less.
I guess by the same token its bad that wealthy individuals can choose which state they live in based on taxes and such?
Not at all. These are good things because they force states to not go out of control, to practice restraint in taxation and expenditures, while at the same time providing proper services to people and companies.
Perhaps in this specific case, but what if it was for a company you don't think has a good chance to succeed? Or how about a company you don't agree with ideologically?
Like I said in another comment these types of deals are turning governments into quasi-investors. They put money up front with the intention that decades later it will pay off. What if some of these projects fail before the pay off?
Up to this point these deals have largely paid off. But if this starts becoming the norm, and government leaders start coming under pressure to outbid each other, I fear for what might start transpiring. Elected officials that are looking to score points for the next election are not someone I'd trust making these long-term decisions.
It seems like a pretty safe bet for the state though. $1B not collected in exchange for $100B benefit overall. And a bunch of high tech and manufacturing skills added to the labour pool, which could attract other companies for less concessions in the future.
It doesn't seem as difficult competitively as eg picking stocks on wall st is what I'm trying to say.
>It doesn't seem as difficult competitively as eg picking stocks on wall st is what I'm trying to say.
Not yet. But I'm a bit worried about the future. The governors in California and Texas are going to take quite a bit of flack from this. The bidding war for these types of projects is likely to get fiercer. As competition between states increases, the margins will get ever slimmer.
What does one have to do with the other? I can't afford practically anything Bill Gates can, but that doesn't mean I should automatically oppose what he wants to do with future government tax revenue.
Many of the 6500 workers at the gigafactory won't be able to afford a Tesla, but at least they'll be able to put food on the table.
There's a distinction between a tax break that's "profitable" because you're on the wrong side of the Laffer curve (i.e., it's self-financing because of efficiency gains & reduced deadweight loss), and a tax break that's "profitable" because you're recruiting business that would have happened elsewhere to your location in particular.
The former is undeniably good public policy, the second is more of a tragedy-of-the-commons from the perspective of those looking to maximize total tax revenue.
If you're going to account for deadweight loss, a tax break can be profitable while lowering tax revenue. Then it would be a tragedy of the commons from the perspective of those looking to maximize tax revenue, but good policy from the perspective of those looking to have nicer lives.
Ordinarily, the Laffer curve is just talking about tax breaks that raise total tax revenue, not tax breaks that bring a net benefit in reduced deadweight loss.
>So Tesla building this plant is a good thing for Nevada.
But the country loses. We as Americans gain nothing by states racing to the bottom to see who can give the biggest tax breaks to businesses. These sorts of tax breaks don't create jobs--they shift them while offloading the tax burden onto individuals.
If citizens can't negotiate their tax rates amongst states, I'm not sure why some think it's ok for businesses to do so.
The country loses? It is not zero sum, the money Tesla saves does not just go under someone's mattress, it helps make Tesla's products cheaper or improve the company in some way or raise the value of its securities that citizens of this country own.
this isn't meant to be an argument that no tax ought to be paid, simply that it is not a loss for our country if fewer taxes are paid. If you are worried non shareholders pay more and gain less, they are free to invest, but shareholders inevitably pay capital gains tax.
>I consider citizens bearing more of the tax burden to be a loss for our country, along with less taxes being paid when we have debt.
Ok, well you are making an argument about ethics and not about monetary losses because it seems that a net gain to economy through reduced taxes would still be a loss to you for above reasons.
>You can't be serious.
people earning 13k usd per year spend 9% of income on lottery tickets so it was indeed a serious point.
>you are making an argument about ethics and not about monetary losses
A "net gain" isn't good enough. Tesla generating $1 in tax revenue is a net gain. The fact is that this new business does not depend on tax abatements, and if we had politicians with spines Tesla wouldn't get one.
This debate is over if you cannot reason that economic improvement as a result of a tax break can offset hypothetical revenue losses. There are states that already have no income tax and the citizens of those states and business owners have benefited and thus from that perspective, it seems you are unwilling to debate the harm that taxes can do but only argue for their good which is ethics. If taxes were at 100% and one state offered a rate of 99%, the same argument would apply and thus you are unwilling to examine effects to the economy but rather argue the value that tax revenue has over personal revenue. Adieu.
>This debate is over if you cannot reason that economic improvement as a result of a tax break can offset hypothetical revenue losses.
That's a simple concept. What I'm talking about is the tertiary effects of such a policy. These tax abatements do not exist in a vacuum.
>There are states that already have no income tax
Yes, and that's a regressive tax structure.
All of this centers around who benefits from these policies. Tax abatements for businesses and no income tax benefits the business owners while shifting the burden to citizens. This is why it's a bad policy.
>All of this centers around who benefits from these policies. Tax abatements for businesses and no income tax benefits the business owners while shifting the burden to citizens. This is why it's a bad policy.
Ok I see what you are saying but I don't really believe in a sort of plutocracy that get all benefits of tax cuts while others get no benefits. The reason being that benefits are hard to localize. Suppose you are correct and some small group of owners benefit from the tax cuts, they then have more money, and then what would the business owners do with the money? For benefits to remain local, they would have to essentially hide their money. If they reinvested all of it or spent all of it, the money keeps changing hands and circulates. Circulating money is economic expansion and economic expansion benefits everyone. So unless there is a dead pool of money which seems a contradiction or that somehow tax revenue circulates through the economy better than profits do, it would seem there isn't a loss anywhere. But that is not to say no taxes should exist because these are societal and not economics.
>If they reinvested all of it or spent all of it, the money keeps changing hands and circulates.
It's well understood that the wealthy don't circulate their money at the same rate that the middle and lower classes do, which contributes to wealth stratification.
Competition between the states is one of my favorite aspects of the US structure of Government. It goes a long way towards encouraging efficiency. True democracy is being able to "vote with your feet" and move around based on personal preferences and values.
> Because business taxes are a drag on the economy, and universally acknowledged to be a bad thing by economists.
Maybe universally by Austrian school economists; certainly not universally by economists more generally (e.g., its pretty clear that neither Brad DeLong nor Paul Krugman think that business taxes are an unqualified evil, and its pretty hard to argue that they aren't economists.)
Hardly just the view of Austrian economists. Plenty of liberal economists including Robert Frank, Dean Baker, even Matt Yglesias think that corporate income taxes are a bad idea.
It's not about "unqualified evil," it's more about the fact that business taxes decrease productivity, take money directly away from employees and consumers, and could easily be offset by any other individualized progressive tax, not to mention the repatriated corporate dollars that would result from a competitive tax scheme.
Here are some fun sources from the NY Times and NPR:
Its certainly not universally held among economists in general, as was claimed upthread. I didn't suggest it was exclusively the view of Austrian-school economists (a very different thing that Austrian economists), but that it might just possibly be universal among Austrian-school economists.
> Plenty of liberal economists including Robert Frank, Dean Baker, even Matt Yglesias think that corporate income taxes are a bad idea.
"even Matt Yglesias"? Matt Yglesias might be a liberal, but he isn't anything like an economist.
I don't buy the "race to the bottom" argument when it comes to tax rates. When there is competition among companies that drives down prices, do you heard people complaining about "the race to the bottom"?
Competition for business between states based on tax rates drives efficiencies. The state that can offer the most for the fewest dollars wins.
>When there is competition among companies that drives down prices, do you heard people complaining about "the race to the bottom"?
States and private companies are completely different. Competition is great when you can tolerate losers (such as private companies). When it comes to states, we don't want losers--we want every state to succeed.
Pitting states against one another only shifts the tax burden to individuals.
>What would be the solution? Collusion between states to keep tax rates the same?
Yes. If the result of states competing in this area is harming citizens, then it should not be practiced. It's also not fair to competing businesses. We all pay the same federal rates without issue.
I'm open, but not keen, on states having different tax rates. I'm 100% against not enforcing those rates consistently, as is the case with abatements.
Tesla gets $1.25B from Nevada. That means that the taxpayers of Nevada, collectively, have $1.25B less while Tesla has $1.25B more. Now Tesla may spend every dollar of that money in the state of Nevada, hiring people, buying supplies, making investments, etc. But for every dollar being spent by Tesla, that's one fewer dollar being spent by a Nevada taxpayer into the same economy. Those dollars that would have been spent hiring people, buying supplies, making investments, and so on from Nevada taxpayers are now not being spent on those things.
So you can count up all the "stimulus" from the money that goes to Tesla over the next decade, but you're ignoring the money that now isn't getting spent and the jobs that now aren't getting created.
Actually, it's worse than just redistribution, for two reasons:
1) It's likely that a lot of the money will not be spent in Nevada, and I doubt anyone is auditing this deal for the next decade to make sure that it is.
2) Before, those dollars were being spent privately by millions of taxpayers who got to decide if the money they spent for X product or Y employee was worth it, and could take individualized risks with their own dollars. But now that their money has been pooled and dumped into Tesla, those taxpayers of Nevada have taken on a substantial risk with no equivalent reward. If Tesla is explosively successful, they don't see any more money than if Tesla just limps along for a couple decades. But if Tesla fails, they've lost it all with nothing to show for it (save for the few people who got a job out of the deal...but there aren't enough jobs at Tesla to compensate every taxpayer in Nevada for the risk).
In short, it's difficult to see this deal as anything more than a great benefit to a few people (Tesla investors, Tesla employees, Tesla consumers) at the expense of the taxpayers of Nevada.
Tesla does not get $1.25B... they just won't have to pay $1.25B over the next 20 years. The Nevada tax payers have the same amount they would have if Tesla never got the deal and thus never built in Nevada.
Tesla gets $195 million in tax credits that they can sell to other companies. Note that it's a credit and not simply a tax break or deduction.
Furthermore, the state and local county will have to pay large amounts of money to support the explosive growth of the community. If they expect 6,500 new workers and 22,000 new residents overall, that means huge upgrade to infrastructure, police, education, etc. That is potentially hundreds of millions that the will not be offset by property or sales taxes from Tesla. That money will be coming from Nevada tax payers.
A tax break and a subsidy are the same thing as far as taxpayers are concerned. As it turns out, tax breaks are considered more politically palatable, but the effect is the same--all taxpayers pay more money than they otherwise would have, to make up for lost revenue from the tax break.
Tax payers are not paying more, likely they are paying less. Hopefully the $1.2B in tax breaks leads to an overall net gain for Nevada (why else would they do it?)
The other option is Tesla builds elsewhere. At no point was there ever an option for Nevada to get the Tesla factory and NOT give tax breaks.
>At no point was there ever an option for Nevada to get the Tesla factory and NOT give tax breaks.
Because there are competing states which can offer tax breaks. But is it better for the US as a whole if states can give tax breaks to individual companies?
Agreed. The people here decrying this as near-bribery or unethical don't understand economics. If the 1.25B tax break causes a net gain in tax receipts due to the expansion of the economy, then the deal is a net positive for everyone, job-seekers, Nevada, and Tesla.
No one loses when the economic pie gets bigger. Economics is not zero-sum.
Wait. No...the taxpayers of Nevada lose. Because the taxpayers, at large, are subsidizing benefits that will be accrued by specific individuals (the new employees, Tesla consumers and investors). Even if the economy grows as a result of this subsidy (which would really be impossible to prove), such gains wouldn't take into account the equivalent loss to the tune of $1.25B that comes out in little pieces from millions of individual taxpayers and taxpaying businesses--that's money that isn't being spent in the economy.
I suspect the poorest taxpayers of Nevada will pay the most, because they are the least likely to be able to afford a Tesla, least likely to have the skills and training to take what jobs are created (and even so, not enough jobs to go around), and also the most hurt by the higher taxes that inevitably result from such a subsidy.
Finding this unethical or wrong doesn't mean we don't understand economics. Even if this leads to profit for the state through higher tax receipts, I still question whether this is a good thing in the big picture.
It's one thing when an entire industry gets a tax break, like how a lot of states have tax incentives for film makers. But to give only this company a singular and specific tax break just seems wrong and anti-free market. It's one step towards a planned economic model.
Plus there is an outside chance this blows up in their face. What if some other company has a breakthrough that makes this battery technology obsolete? What if Tesla then goes belly up and the factory is shut down? That is very much a possibility. Should our government leaders be deciding what companies to bet on? It's almost like they are quasi-investors in Tesla now.
I don't think the "blow up in their face" scenario makes sense. If the factory fails, then Nevada is back where they started. Since these are tax breaks, they're just cutting down on revenue they would have otherwise collected from the factory. If the factory fails, then it stops paying taxes regardless. It's not like Nevada wrote a $1.25 billion check to Tesla.
It's sort of like giving a really good chef a discount on rent if he moves into your apartment. You think it's worth it because he'll cook some great food for you. If he loses his job and has to move out, you're just back where you started. That you were planning on giving him a total discount of $100,000 over 10 years (for example) doesn't mean you're now out $100,000 whet it didn't work out.
I don't like the idea of localities competing on tax breaks like this, but the downside in my view is simply letting successful companies avoid taxes, not any trouble from extending tax breaks to failing ones.
>$195 million in transferable tax credits, which other Nevada companies will be able to buy from Tesla in order to reduce their own tax liabilities to the state.
Credits are basically the state writing them a check. Plus the article mentions the state buying the USA parkway for an additional 43 million. And I'm not completely sure how the reduced electricity bill works, but I gotta imagine that it will be passed on to the government somehow.
If Tesla went belly up 5-10 years into this project before the tax breaks are up, the state would lose out quite a lot. Might not exactly be 1.25 billion, but still a lot.
Edit: Wanted to add there is also unseen expenses and burdens placed both on the state and county government where this project occurs. Tesla wouldn't be paying property tax, yet there would be a very significant increase in population to the area. That means more police, teachers, infrastructure, etc. The burden would be placed on local individuals and other businesses. There isn't an exact number to put on this, but I wouldn't be surprised if it would be hundreds of millions of dollars.
> But to give only this company a singular and specific tax break just seems wrong and anti-free market. It's one step towards a planned economic model.
Why would you describe this as giving only this company a singular and specific tax break? Getting tax breaks like this is routine for all companies above a certain size; just because it's done on a case-by-case basis doesn't make any one case more special than all the others.
This exact deal is not open to any other company. This isn't a policy that's open for everyone to take advantage of in the way that some tax breaks are, e.g. for film makers.
Just because other deals like this have also occurred doesn't mean this one isn't also singular and specific. Don't know why you're getting pedantic on this.
Again, this is a particular application of a long-standing, widely-applicable policy on the part of the state of Nevada. It's very similar to, and just as anti-free-market as, a company with pricing tiers of
$50 / month: bad service
$400 / month: we respond to your emails
$2000 / month: you can page a support engineer at any time
If you need more, call us: XXX-XXX-XXXX
Tesla, like so many other companies, is operating at the "call us" level of service (what you describe as "this exact deal is not open to any other company"). The currency they're spending is voter satisfaction instead of dollars.
Asking local governments for tax breaks is part of the process of siting factories. The terms vary from case to case, which is completely normal in the free market. That's how all major transactions are negotiated. But yes, this is a policy anyone can benefit from, as long as they're siting a factory or doing something similarly exciting to politicians.
I suspected I shouldn't have copy and pasted that quote because everyone would react to it and not, say, the comprehensive report on the subject we're talking about that I linked to.
The point is that governments are throwing money at companies without really having any idea if it is a good idea. The data is - at best - unclear.
> There is no evidence of personal financial gain for the officials who got this deal to be made.
I don't think people are alleging personal financial gain, but rather more of a political kind of corruption: buying votes with high-profile projects. The allegation is that politicians are mainly driven by short- to medium-term reelection concerns, and therefore are buying a current positive headline ("Tesla relocates to Nevada!"), and perhaps a near-term employment boost. And that they are doing this without consideration of whether in the long-term it's actually a good allocation of tax breaks. It's possible that it is, but I don't believe that Nevada politicians either know that that's true, or care whether it's true.
In many ways I think this should be illegal. If for no other reason as it creates huge incentives for bribery up front and after these expire to keep a factory from moving. But, also because at a constitutional level it interferes with state commerce much like Nevada deciding on an import tax from other states.
However, city's or states lowering their taxes on every business is a different story.
And this is why many enter politics. It's why there's such a huge lobbying industry; why there is such an industry. We entrust them with a lot of power, they just wield it.
I actually have no problem with a state doing this, so long as they dish out the tax breaks equitably.
A tax break by definition is something that's not dished out equitably. :) ("Favorable tax treatment of any class of persons" is how Wikipedia describes a tax break, which sounds about right.)
What you're describing is the opposite of a tax break. One example would be across-the-board tax relief such as lowering income taxes or property taxes for everyone, whether they're in an industry favored by the current politicians in office or not.
Even if it's not completely equitable it doesn't have to be 0 or negative sum.
If I were making 15 an hour at the local casino, I'd be pretty happy to pay more taxes and take a 25 dollar an hour job at Tesla. Sure, Tesla isn't paying its full share but we're both better off.
Your comparing production of something with it's use. There giving incentives to a factory so the equivalent would be subsidizing a refinery which as you might imagine would have little impact on gas usage in a state.
I'd guess it's not really about the batteries, although it is cool. It's about the 6,500 jobs Tesla plans to create. Over the 20 years this tax break runs, that $1.25B is about $9,600 per employee per year. They might make that up in payroll, sales, and property taxes from the employees alone.
>They might make that up in payroll, sales, and property taxes from the employees alone.
I might be wrong, but I think Nevada doesn't have income tax. And property tax is typically paid to local county/city governments.
I think it's still open to debate whether Nevada will really recoup all this money in taxes. Of course there are benefits other than pure tax dollars. This could lead to a convergence of high tech manufacturing in the area.
The fact that these deals happen, and the fact that a small company can't get them, feels like the tax equivalent to the net neutrality debate.
Big guys can afford the transaction costs of preferential treatment, small guys have to get by like everyone else. In both cases the provider is a government-backed monopoly. You can port the net neutrality arguments to this issue with a simple term substitution. All I am saying that if someone is 'for' net neutrality, it's hard to be 'against' tax neutrality.
Having said that, in a world where these deals happen, Tesla is right to extract the best deal they can, regardless of what would be the global optimum.
The analogy doesn't hold. In cases like this everybody wins - the money 'given away' by the state is merely virtual, both sides and the economy as a whole end up with net gains. In the case of net neutrality, the big guys get rich while customers suffer from poor service, and no value is created.
Sizable state/municipal tax breaks have been granted to other companies and industries over the past three decades. While things generally worked out for the southeastern U.S. states that granted breaks to auto manufacturers and their suppliers, the situation hasn't been so rosy for states that targeted huge solar research/manufacturing projects (1) or municipalities which have subsidized stadiums for professional sports teams (2, 3).
In Tesla's case, what if the demand doesn't meet the projections cited in the article? What would that mean for taxpayers in Nevada?
Here in Oregon, notable tax breaks have been granted to Nike, Intel and others. The issue comes up periodically, especially in election years. Concerns about companies paying a "fair share" of taxes is very common, but doesn't go anywhere.
As I see it, giving the tax break is a gamble. The state or local government wagers that the tax relief will bring in more revenue (through increased jobs, stimulating local business, etc.) than lost in the incentive package.
With really large companies the bet usually pays off, but of course it sometimes doesn't. But that's what gambling is all about.
IIRC, Intel shopped for a location for a chip fab
back in the 1990s - Pentium F00F bug timeframe - and narrowed
the possible sites down to 12 or 15, then to 8 or 10,
etc. and finally to 3 states, and basically asked them
to bid with tax credits for a ~2 billion project, and
they all gradually raised their bets until nobody would
offer more - and then Intel accepted all 3 offers -
New Mexico, Oregon, and one other. Smooth move
on Intel's part, and it worked out for them. The
"winning" states had more mixed feelings.
So, when I see that Tesla needs to spend ~$10 billion,
and is only required to spend 3.5B, I can't help but
wonder if other sites/states are still bidding.
I don't remember what happened back then, but I do know that here in Oregon, Intel has received tax breaks from the state and Washington County where the Intel R&D fab is located. OTOH while Intel has fabs in many places, their investment in this region has grown rather steadily over the years.
It's reported that Intel remains the state's single largest employer. As far as Oregon is concerned, and the Portland metro area in particular, the tax break for jobs tradeoff looks like a pretty good deal after all.
Though property owners grouse about Intel avoiding its "fair share" of taxes, our local, regional and state governments aren't likely to complain or change their policies.
What right does the government of Nevada has to gamble with taxpayers' money? There are enough casinos in the state such that people can gamble their own money quite easily if they choose to do so. They don't need their own government putting it on red on their behalf.
This happens all the time. It's Tesla so it's on HN. And this is a single deal for Nevada but again because it's Tesla it's a huge win. With CA next door and facing so many challenges suddenly Nevada is "sexy". Big move all round. So many secondary businesses will set up shop near the mother ship.
I see a lot of discussion in these comments about the effects of competition between states. But it seems to me that the real objection, among those who have an objection, is the tax discrimination. In other words, I don't think anyone would have a problem with Nevada luring companies in by lowering their tax rate. But that is not what is happening. They are luring Tesla by the lowering the tax rate for Tesla alone. There is certainly a fairness issue here, where a large company in Nevada pays one rate and all the small companies in Nevada pay a different rate.
Here in Florida, it is quite common for large companies to move operations here from up North and not pay any property taxes for 10+ years, due to deals like this. Of course, when I start a small business in Florida, you'd better believe I have to pay my property taxes. So, this kind of "local economic development" results in a kind of subsidy for large companies at the expense of small ones.
Tesla is primarily competing with other large businesses, who are getting subsidies also, so its unlikely that this deal is directly effecting the competitiveness of any small businesses in Nevada. However, local businesses will compete with Tesla for employees, and also have to split the cost for roads, sewage, law enforcement, etc. unevenly with Tesla. So, Nevada taxpayers are certainly within their rights to expect the new company in town to pay the same tax rates as they have to.
Now, I don't think that these local economic development deals alone are behind the consolidation which has been happening in our economy for the last few decades. But it sure isn't helping. You'd think people on a site focused on small businesses would get this.
As a Texan, I'm now suddenly glad Tesla didn't build here. I love Tesla more than the average human, but I'm not sure I want to give them a billion-dollar tax break at my expense.
> In exchange, the company must invest a minimum of $3.5 billion in manufacturing equipment and real property in the state—a threshold that is much lower than the $10 billion state officials expect the company to invest in Nevada over the next two decades.
At the same time Texas loses having a high tech manufacturing base. How would this have been a net negative on Texas?
> How would this have been a net negative on Texas?
Not for Texas. For Texans. These tax reductions are given out to those with bargaining power, leaving those without to pay the bills. Mainly, the average tax payer.
Not sure I understand. Lets say the tax burden on a Texan today is X. Without the TSLA factory, lets say it would be Y, and let it be Z if the TSLA factory is built.
Why do you think Z would be much higher than Y ? The government isn't paying to build the factory is it?
Who is paying for the roads, sewer, fire protection, police protection, etc.?
Those services aren't free. Normally the burden is shared by all, by with these special deals, they're shared by those who didn't get the special deal.
Governments tend to VASTLY overestimate the benefits to the economy. The same thing happens a lot with sports teams/stadiums and events like the Olympics.
Why is it, that if Tesla is such a great and noble company doing great and noble things, that it can't operate without cheating on its taxes? Every person in Nevada now gets to pay for Tesla's selfishness.
And no, there won't be any massive influx of good jobs or any 0.0% unemployment rate. Tesla's factory will be run by robots and temporary foreign workers being paid half the local wage, because "they just can't get good workers". And no, there won't be any taxes collected in 10 or 20 years when these deals expire, because Tesla will simply threaten to move to another state unless the deals are extended.
Shameful all the way around. Crony capitalism at its finest.
The answer is clout. A 25 employee software company that is equally innovative on a per-head basis would get laughed out of the government offices if they requested a rate-equivalent tax break.
Your point is taken, but the ability of Tesla to do this whilst other companies do not have the same opportunity strikes many as unfair.
Nobody is paying for anything. They're just deferring revenue. If they hadn't, that future revenue would exist somewhere else and wouldn't benefit Nevada. Now, Nevada will receive more jobs in the short term, more revenue in the long term, and lay the foundation for more industries to take advantage of (rails, roadways, power, etc.).
Nevada isn't going to receive any revenue, in the short or long term. Rather, Nevada is going to be paying a great deal to fund Tesla's operations, build roads for them, run electricity to their factory, and Nevada is going to get absolutely nothing for it, since Nevada has given Tesla a total and permanent tax exemption.
That was sort of the point of the article, which you may have missed.
> (rails, roadways, power, etc.)
You know those are expenses to Nevada, right? Which Nevadans will be paying for, to benefit Tesla?
