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.
No one loses when the economic pie gets bigger. Economics is not zero-sum.