Does Nevada's 1.3 blns in Tesla Corporate Welfare Make Sense? (interest, property taxes, property)
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Some people still do not understand why it makes good sense for the people of Clark County Nevada, for Nevada to give Tesla the tax breaks they are, to get the company to move to Nevada for the battery plant.
Tesla will bring $100Billion to Clark County in Benefits over the next 20 years. Tax breaks to get a company and facility like this to Nevada to help them get the plant off the ground and be profitable, means the company will put the facility there. In return it will provide jobs for thousands of people, and for every job provided by Tesla, there will be a total of 5 more jobs for every one provided by Tesla. This is a tremendous boost to Clark County with a large percentage of those jobs in Clark County. It will greatly increase the total tax receipts to the county, and income taxes to the state.
There is an old concept in business that has always proven true, "You have to spend money to make money!" .
Nevada and Clark County are willing to not take certain monies out of the Tesla hands (spending money) that would never have been available to them if Tesla does not go there, and letting Tesla keep it. In return they are getting $100Billion dollars over 10 years in benefits for Nevada and Clark County.
It simply means: If Tesla does not put the plant there, the state and the county get nothing. If they put the plant there, Nevada and Clark county forgo receiving $1.3Billion, to benefit the area with $100Billion that would not happen, without giving up $1.3Billion. This is called investing in the future, by reducing what you would get by 1.3%.
To put it simply, would you be willing to invest $1.30 of money you do not even have now, if you could get $100 paid out to you over the next 20 years, knowing that $1.30 is coming out of the $100 giving you a net of $98.70 and never putting up any money to get it.
Old Trader, the Tesla site is in Storey county. Clark county is Vegas, and Reno is Washoe. It is 15 miles East on I80 in Storey county within a couple miles of the Mustang ranch.
The Nevada taxpayer pays zero! All the 1.3 billion is tax breaks only.
I think this sums up what the pro-incentives camp are saying. With or without incentives, NV taxpayers do not pay any more in the short term, although this sidesteps the issue of the use and maintenance of taxpayer subsidized infrastructure and services that would have been paid through those taxes.
So, it's not that NV has a no-risk gamble, it just happens to be at a low short-term cost. There is hope for a long-term payoff. But then in all fairness we should also consider the potential longer term cost to NV with this strategy, which would mostly come in the form of opportunity costs.
What if other businesses had arrived to Reno in place of Tesla, who would have willingly paid full business taxes and foregone any incentives, in exchange for the infrastructure, goods and services that they will use in NV, right from the start? It doesn't have to be one big mega-corp; the total be reached through the sum contributions of multiple smaller businesses that add up to the same resource usage as Tesla.
Also, now that Tesla has set a precedent and standard for a certain level of credits and incentives, other companies who would have been willing to go less or without such incentives will now expect greater concessions from NV, whereas they would not have necessarily been as aggressive before. It would be appropriate to add a small fraction of every future business credit given out for 10 years as being part of the total cost of the Tesla credit.
While we're here though, let's not forget that NV's incentives package was not the most generous one out of the multiple offers that Tesla received, in terms of straight dollars.
Also, now that Tesla has set a precedent and standard for a certain level of credits and incentives, other companies who would have been willing to go less or without such incentives will now expect greater concessions from NV, whereas they would not have necessarily been as aggressive before. It would be appropriate to add a small fraction of every future business credit given out for 10 years as being part of the total cost of the Tesla credit.
So who are all these businesses that are lined up to move to Nevada? Can you name one?
This is a typical straw man argument. Oh, we can't just give out incentives, because then all the other electric car battery companies owned by rocket entrepreneurs will want incentives, too!
Looking at our national situation, we have lost much of our manufacturing capacity because of a variety of reasons--labor costs, regulations, taxes, etc. We should ask ourselves--do we, as a nation, wish to have domestic manufacturing? Or are we content to price ourselves out of the market and let others do all the heavy manufacturing work? And make all the money, too?
In my opinion, we should be attracting manufacturers, not driving them away. Maybe in the 1960s we could afford to tax the hello out of them, punish them for environmental transgressions, etc. etc., but today we have whole generations of young people graduating high school with very dim prospects. Even college grads are having a tough time, but if you're blue collar today, good luck to you. It's fast food, bagging groceries, or the trades.
In the old days there were millions of manufacturing jobs which afforded people a to buy a house, raise a family, and have a stable career. We've lost those jobs, to the great detriment of society. This is why I'm so impatient with people who decry the rare state government that tries to attract industry with tax incentives. Maybe more states should offer tax incentives and then we wouldn't have so many people on food stamps, so many youths in criminal gangs or dead end jobs, and by the way--good jobs means more tax revenue.
So who are all these businesses that are lined up to move to Nevada? Can you name one?
This is a typical straw man argument. Oh, we can't just give out incentives, because then all the other electric car battery companies owned by rocket entrepreneurs will want incentives, too!
Looking at our national situation, we have lost much of our manufacturing capacity because of a variety of reasons--labor costs, regulations, taxes, etc. We should ask ourselves--do we, as a nation, wish to have domestic manufacturing? Or are we content to price ourselves out of the market and let others do all the heavy manufacturing work? And make all the money, too?
In my opinion, we should be attracting manufacturers, not driving them away. Maybe in the 1960s we could afford to tax the hello out of them, punish them for environmental transgressions, etc. etc., but today we have whole generations of young people graduating high school with very dim prospects. Even college grads are having a tough time, but if you're blue collar today, good luck to you. It's fast food, bagging groceries, or the trades.
In the old days there were millions of manufacturing jobs which afforded people a to buy a house, raise a family, and have a stable career. We've lost those jobs, to the great detriment of society. This is why I'm so impatient with people who decry the rare state government that tries to attract industry with tax incentives. Maybe more states should offer tax incentives and then we wouldn't have so many people on food stamps, so many youths in criminal gangs or dead end jobs, and by the way--good jobs means more tax revenue.
Just my humble opinion
No problem as long as you're willing to work for Chinese wages. Otherwise, it's not a credible argument.
No problem as long as you're willing to work for Chinese wages. Otherwise, it's not a credible argument.
Making it affordable for manufacturers to be here doesn't mean lowering wages to Chinese levels. Wages are only about 9-10% of manufacturing costs. It does mean reducing taxes, regulations, and labor restrictions to some level that is acceptable to both parties.
Chicago used to be a huge manufacturing region, as was New York and Massachusetts. These regions have driven a lot of their manufacturers away through zealous application of lawsuits, over taxation, union-friendly labor laws, and so forth. I remember a state lawsuit in Illinois against an office products company because their labor force wasn't "racially balanced".
Massachusetts -- used to be a center of precision manufacturing as well as shoes and apparel; now aside from a few high tech, military, and medical instrument companies, it's a wasteland. They're about to lose the medical instrument industry, too, unless they can find a way to exempt them from the revenue tax that's part of the Affordable Care Act--it's a 2% tax on total revenue which must be paid even if a company is losing money. Real smart move, to kill one of our few remaining domestic manufacturing sectors.
You can't keep doing this and not kill the goose that lays the golden eggs.
Tesla will bring $100Billion to Clark County in Benefits over the next 20 years.
Hard to prove that statement, seeing as the plant is a seven-hour drive away from Clark County. How, exactly is Clark Country going to benefit? We already receive far less than we pay in taxes. We're the cash cow that keeps Nevada ticking. Without us, all those ranchers up north wouldn't be able to afford their schools, transportation and infrastructure.
So who are all these businesses that are lined up to move to Nevada? Can you name one?
Are you saying that despite NV having lower taxes and being generally more business friendly than CA, there's nobody that wants to set up shop in NV? That it takes such huge concessions from the state to bring somebody in?
Now that it has happened, there will almost always be concessions to bring new business to NV, for the duration of Tesla's tax break! Even if we say that they would have happened anyway, we're sure that future concessions will likely be larger than they would have otherwise been. Will this be worth it?
I fully agree with your expressed sentiments, just not the conclusion to immediately accept that $1.2 billion over 10 years is the right price or even figure. What I was basically trying to say is that when it comes to calculating the cost accurately we should consider as much of everything as we can to the best of our ability.
Fiscal responsibility and all that, so even if someone says that NV is desperate enough to give up a huge incentive package, I think it won't hurt to go ahead and examine & question whether it will be worth the cost. Then carefully watch the results over the next decade and learn from the experience as to whether or not this was a good policy.
So, opinion taken seriously and with a grain of salt (standard procedure for opinions)!
Hard to prove that statement, seeing as the plant is a seven-hour drive away from Clark County. How, exactly is Clark Country going to benefit? We already receive far less than we pay in taxes. We're the cash cow that keeps Nevada ticking. Without us, all those ranchers up north wouldn't be able to afford their schools, transportation and infrastructure.
First, I disagree with this statement to a certain extent. However, if 6500 more people are working and paying sales tax it will be less of a burden on your perceived cash cow.
Making it affordable for manufacturers to be here doesn't mean lowering wages to Chinese levels. Wages are only about 9-10% of manufacturing costs. It does mean reducing taxes, regulations, and labor restrictions to some level that is acceptable to both parties.
Chicago used to be a huge manufacturing region, as was New York and Massachusetts. These regions have driven a lot of their manufacturers away through zealous application of lawsuits, over taxation, union-friendly labor laws, and so forth. I remember a state lawsuit in Illinois against an office products company because their labor force wasn't "racially balanced".
Massachusetts -- used to be a center of precision manufacturing as well as shoes and apparel; now aside from a few high tech, military, and medical instrument companies, it's a wasteland. They're about to lose the medical instrument industry, too, unless they can find a way to exempt them from the revenue tax that's part of the Affordable Care Act--it's a 2% tax on total revenue which must be paid even if a company is losing money. Real smart move, to kill one of our few remaining domestic manufacturing sectors.
You can't keep doing this and not kill the goose that lays the golden eggs.
So how does Western Europe make this work? Your ideal is simply the continued beat down of the American working class. We have law makers that have allowed laws that benefit outsourcing that you clearly support. The real answer is somewhere in between, because a continued shift from middle to lower class reduces consumer spending. Have you ever wondered why either party has done anything about illegal immigration? Because it drives down wages.
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