6 ms·

Nevada’s $1.3B gamble on Tesla

28 points by ghosh 11y ago

danhak 11y ago
Not a gamble at all. Aside from the land swap, all the incentives are performance based. If Tesla reaches its target 50 GWh / yr production capacity in 2020, we're talking at least $5 Billion / year in economic output through the 20-year life of the incentive package (assuming a very conservative $100 / kWh). Not to mention all the employment, development and additional economic activity the factory will generate. How exactly does Nevada lose here?
- lotsofpulp 11y ago
  If I was working at Tesla, towards the end of the 20 years, I would start shopping around other states and try to get a similar package to move there, and then let Nevada counteroffer.
  - rubidium 11y ago
    That's what pretty much all companies do with these deals.
- deleted 11y ago
  [deleted]
sandworm101 11y ago
I don't like seeing any company get such special treatment. A facility free from sales taxes for a generation is definitively unfair competition. If Tesla does manage to lower costs as expected and floods the market with cheaper batteries, how will this not be dumping based on a private deal? 1.3 billion. There are only three million people in Nevada. That's 433$ for each and every person in the state.
- danhak 11y ago
  Shouldn't states be able to compete among themselves, in a free market fashion, in order to attract business development that is likely to pay huge dividends over the long term? It's a little disingenuous to divide the incentive package--which is effective over 20 years and only if Tesla meets all its targets--by the population of Nevada, without similarly considering the taxable revenue the company will generate over the same period if those targets are reached.
  - krapht 11y ago
    My problem with it is that citizens are supposed to be equal under the law. There isn't equal access to these incentives. Doesn't an educated professional moving to Nevada also bring positive externalities to the state? Yet they will never be able to negotiate incentives like these due to the great disparity in bargaining power. I am against special carve-outs, subsidies, and other manipulations of the tax code in general for the same reason.
    - danhak 11y ago
      Your point is well taken, but an educated professional moving to Nevada is not likely to affect the state's economy enough to move the needle. I'd contend that there is equal access to incentives like this for any entity with sufficient scale.
      - krapht 11y ago
        Sometimes I like to pretend I live in a country where those with money and influence don't receive preferential treatment from the state. I know why it happens. I know it will continue to happen. The same thing happens on the country-scale with multi-nationals picking the most favorable nation to be taxed in. But I don't want my government to enable the game by playing it. Pardon me while I wait for Tesla's windfall to trickle-down and lift all my boats.
      - fennecfoxen 11y ago
        > there is equal access to incentives like this for any entity with sufficient scale. Even when that's perfectly so and the rest of Democracy is perfectly fair, this dynamic is intrinsically unfair and benefits the rich and powerful established interests at the expense of smaller entities. It's the gateway from capitalism to cronyism.
fraserharris 11y ago
These are property and sales tax abatements on property and sales that only exist because Tesla set up shop in Nevada. You can quibble about the length of the tax abatements (10 and 20 years), but the perceived "$1.3B gamble" is tax revenues that never existed.
- bryanlarsen 11y ago
  Property taxes are used to build infrastructure used by the taxpayers, such as roads, water & sewer connections, et cetera. Presumably they will be building such for Tesla, so they will be out some 'real money'.
  - Avshalom 11y ago
    When VW moved into Chattanooga they got their own firestation, EMS dispatch and hospital for instance, that's of course in addition to the roads, water etc...
    - linkregister 11y ago
      Which is more than funded by the workers' property taxes, income taxes, and sales tax revenue.
      - hackbinary 11y ago
        Why should the 'workers' pay higher taxes, and the 'company' pay lower taxes? What makes that a morally just argument?
        prostoalex 11y ago
        1) As Nevada has no personal income tax, workers' liability on that portion would be the same as company's - close to zero. 2) Property and local sales taxes are more likely to stay in the community, whereas the corporate taxes would be sent to Carson City and redistributed to who knows what. 3) Municipalities with strong and diverse property tax sources tend to be community-driven and citizen-oriented. Municipalities with single source of income coming from some corporate giant are incentivized to be pushovers for corporate agenda.
sandstrom 11y ago
I think company-negotiated deals with states should be outlawed. It distorts competition (small companies can't get them) and is a 'race to the bottom' of sorts (with states as a collective losing). That said, I wouldn't call it a gamble. Almost all of it is tied to performance/output, so there is little risk for the state.
- xemdetia 11y ago
  I don't think it's that irregular for small or medium sized businesses to negotiate with states or even the local town, and these are businesses at the 2MM to 5MM scale. This can come down to preferential tax laws in exchange for at-cost services or zoning exceptions. This is certainly the sort of thing that happened with the birth of broadband well before they started merging together.
- prostoalex 11y ago
  If the bulk of the tax deal is "20 years free from sales tax, and 10 years free from property tax", you can emulate the first half of the deal with a variety of states whose sales tax is 0% to begin with. Property tax would be trickier to avoid, but depending on the scope of the project deals can be found in bad parts of town where the property value is low. My guess is that the footprint they require is so enormous, they had to negotiate property tax rates. Otherwise property taxes are usually not a huge concern for manufacturing businesses (and are deductible against other liabilities).
orasis 11y ago
I wouldn't call tax credits a "gamble". Gamble implies downside risk.

28 points by ghosh 11y ago

Not a gamble at all. Aside from the land swap, all the incentives are performance based. If Tesla reaches its target 50 GWh / yr production capacity in 2020, we're talking at least $5 Billion / year in economic output through the 20-year life of the incentive package (assuming a very conservative $100 / kWh). Not to mention all the employment, development and additional economic activity the factory will generate. How exactly does Nevada lose here?

lotsofpulp 11y ago
If I was working at Tesla, towards the end of the 20 years, I would start shopping around other states and try to get a similar package to move there, and then let Nevada counteroffer.
- rubidium 11y ago
  That's what pretty much all companies do with these deals.
deleted 11y ago
[deleted]

sandworm101 11y ago

I don't like seeing any company get such special treatment. A facility free from sales taxes for a generation is definitively unfair competition. If Tesla does manage to lower costs as expected and floods the market with cheaper batteries, how will this not be dumping based on a private deal? 1.3 billion. There are only three million people in Nevada. That's 433$ for each and every person in the state.

danhak 11y ago
Shouldn't states be able to compete among themselves, in a free market fashion, in order to attract business development that is likely to pay huge dividends over the long term? It's a little disingenuous to divide the incentive package--which is effective over 20 years and only if Tesla meets all its targets--by the population of Nevada, without similarly considering the taxable revenue the company will generate over the same period if those targets are reached.
- krapht 11y ago
  My problem with it is that citizens are supposed to be equal under the law. There isn't equal access to these incentives. Doesn't an educated professional moving to Nevada also bring positive externalities to the state? Yet they will never be able to negotiate incentives like these due to the great disparity in bargaining power. I am against special carve-outs, subsidies, and other manipulations of the tax code in general for the same reason.
  - danhak 11y ago
    Your point is well taken, but an educated professional moving to Nevada is not likely to affect the state's economy enough to move the needle. I'd contend that there is equal access to incentives like this for any entity with sufficient scale.
    - krapht 11y ago
      Sometimes I like to pretend I live in a country where those with money and influence don't receive preferential treatment from the state. I know why it happens. I know it will continue to happen. The same thing happens on the country-scale with multi-nationals picking the most favorable nation to be taxed in. But I don't want my government to enable the game by playing it. Pardon me while I wait for Tesla's windfall to trickle-down and lift all my boats.
    - fennecfoxen 11y ago
      > there is equal access to incentives like this for any entity with sufficient scale. Even when that's perfectly so and the rest of Democracy is perfectly fair, this dynamic is intrinsically unfair and benefits the rich and powerful established interests at the expense of smaller entities. It's the gateway from capitalism to cronyism.

fraserharris 11y ago

These are property and sales tax abatements on property and sales that only exist because Tesla set up shop in Nevada. You can quibble about the length of the tax abatements (10 and 20 years), but the perceived "$1.3B gamble" is tax revenues that never existed.

bryanlarsen 11y ago
Property taxes are used to build infrastructure used by the taxpayers, such as roads, water & sewer connections, et cetera. Presumably they will be building such for Tesla, so they will be out some 'real money'.
- Avshalom 11y ago
  When VW moved into Chattanooga they got their own firestation, EMS dispatch and hospital for instance, that's of course in addition to the roads, water etc...
  - linkregister 11y ago
    Which is more than funded by the workers' property taxes, income taxes, and sales tax revenue.
    - hackbinary 11y ago
      Why should the 'workers' pay higher taxes, and the 'company' pay lower taxes? What makes that a morally just argument?
      - prostoalex 11y ago
        1) As Nevada has no personal income tax, workers' liability on that portion would be the same as company's - close to zero. 2) Property and local sales taxes are more likely to stay in the community, whereas the corporate taxes would be sent to Carson City and redistributed to who knows what. 3) Municipalities with strong and diverse property tax sources tend to be community-driven and citizen-oriented. Municipalities with single source of income coming from some corporate giant are incentivized to be pushovers for corporate agenda.

sandstrom 11y ago

I think company-negotiated deals with states should be outlawed. It distorts competition (small companies can't get them) and is a 'race to the bottom' of sorts (with states as a collective losing). That said, I wouldn't call it a gamble. Almost all of it is tied to performance/output, so there is little risk for the state.

xemdetia 11y ago
I don't think it's that irregular for small or medium sized businesses to negotiate with states or even the local town, and these are businesses at the 2MM to 5MM scale. This can come down to preferential tax laws in exchange for at-cost services or zoning exceptions. This is certainly the sort of thing that happened with the birth of broadband well before they started merging together.
prostoalex 11y ago
If the bulk of the tax deal is "20 years free from sales tax, and 10 years free from property tax", you can emulate the first half of the deal with a variety of states whose sales tax is 0% to begin with. Property tax would be trickier to avoid, but depending on the scope of the project deals can be found in bad parts of town where the property value is low. My guess is that the footprint they require is so enormous, they had to negotiate property tax rates. Otherwise property taxes are usually not a huge concern for manufacturing businesses (and are deductible against other liabilities).

orasis 11y ago

I wouldn't call tax credits a "gamble". Gamble implies downside risk.