6 ms·

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 ov

by 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.
    - danhak 11y ago
      Maybe I'm out of touch, but I just don't consider a fledgling electric car manufacturer to be an "established interest."
      - fennecfoxen 11y ago
        Elon Musk is worth $13 billion. Tesla Motors is worth $19 billion (roughly half of Nissan). Both are household names. You read about their exploits in these pages, and in publications such as the New York Times or Wall Street Journal, as a matter of routine. QED And sure, you don't expect the Mom and Pop family-owned shop down the street to spring up to compete with Tesla like you might expect a local bakery to compete with General Mills, but you do expect Tesla to have some competition in areas like the labor market.
        deleted 11y ago
        [deleted]
protomyth 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? That sounds perfect except we are talking about governments that are supposed to represent all of the people and not just selected interests. This is a judgement by government picking a winner. I dearly wish it was illegal for local or state governments to give any tax deals for specific companies or organizations.
- Shivetya 11y ago
  The Federal government does the same and much of it is for similar reasons, should it be prevented from doing so? We have many examples at all levels of companies donating to political campaigns to get returns. I don't mind states competing with each other to bring in jobs. Such competition can cause some states to not make bad budgetary decisions that drive business out as well as trap their population in undesirable areas. Business and personal mobility is what makes the country stronger economically. They are betting on a return of investment which is better use of money that making financial promises to agencies which produce no money but instead incur long terms costs. Those deals are usually purely to prop up the political fortune of local politicians. They lead to upside down budgets and long term debts that force higher taxes putting them at a competitive disadvantage for new jobs and drive professionals out.
  - protomyth 11y ago
    > The Federal government does the same and much of it is for similar reasons, should it be prevented from doing so? Yes, a hundred times yes. This is one of the biggest problems with our tax law and allows politicians, under the guise of promoting businesses and jobs, of bribing people and companies. One law for all. Competing can be done without alterations in tax law to bribe companies. Its a straight up cash bribe and nothing more honorable. All of these deals are made with other people's money. Its bad enough we have status seeking politicians trying to attract sports teams. I look at the absolute bull that FX companies deal with and see all the problems of allowing government bribes.
- prostoalex 11y ago
fennecfoxen 11y ago
Expecting to have a government (or a series of governments) work like a "free market" is problematic, because there is no reason to expect that market to be efficient. In particular, no one should expect a free market to be efficient when transaction costs are high. Consider transactions one would have with a regional government: a family moving from one state to another is expensive, paying a lawyer for your small business to ensure compliance with a new jurisdiction is expensive... even just getting a real conversation with your state-level representative (let alone lobbying for a tax break) is kind of a big deal: has anyone here done it recently? As a result, you would expect concentrations of power to emerge in the form of special interest groups and corporations who can pay those transaction costs more readily. (This is intro-to-Econ level stuff, if you ever care to study the field.)
- deleted 11y ago
  [deleted]
pbreit 11y ago
Plus, there's no money to dole out without the deal.
rhino369 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? Sure, but that competition should be based on taxes that don't discriminate for and against certain individuals and companies. There is also an argument that allowing states to compete with each other just causes a race to the bottom. Tesla was going to build the factory anyway. The country as a whole is worse off is Telsa is allowed to negotiate away all taxes by forcing states to compete over it.
- prostoalex 11y ago
  > The country as a whole is worse off In a vacuum environment where it's 50 states and no one else that rings true. In global environment US was already competing at country level, would Nevada be better off if the factory went to China or Mexico?
LordKano 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? Of course they should but I believe his objection is the sweetheart deal for one company. For example, if Nevada wants to compete with Arizona, it should lower its tax rate. It shouldn't be able to keep the tax rate high and offer a deal to one company that eliminates taxes for them and for them alone. It provides one company with an unfair advantage over any potential competitors.

by danhak 11y ago

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.
  - danhak 11y ago
    Maybe I'm out of touch, but I just don't consider a fledgling electric car manufacturer to be an "established interest."
    - fennecfoxen 11y ago
      Elon Musk is worth $13 billion. Tesla Motors is worth $19 billion (roughly half of Nissan). Both are household names. You read about their exploits in these pages, and in publications such as the New York Times or Wall Street Journal, as a matter of routine. QED And sure, you don't expect the Mom and Pop family-owned shop down the street to spring up to compete with Tesla like you might expect a local bakery to compete with General Mills, but you do expect Tesla to have some competition in areas like the labor market.
      - deleted 11y ago
        [deleted]

protomyth 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? That sounds perfect except we are talking about governments that are supposed to represent all of the people and not just selected interests. This is a judgement by government picking a winner. I dearly wish it was illegal for local or state governments to give any tax deals for specific companies or organizations.

Shivetya 11y ago
The Federal government does the same and much of it is for similar reasons, should it be prevented from doing so? We have many examples at all levels of companies donating to political campaigns to get returns. I don't mind states competing with each other to bring in jobs. Such competition can cause some states to not make bad budgetary decisions that drive business out as well as trap their population in undesirable areas. Business and personal mobility is what makes the country stronger economically. They are betting on a return of investment which is better use of money that making financial promises to agencies which produce no money but instead incur long terms costs. Those deals are usually purely to prop up the political fortune of local politicians. They lead to upside down budgets and long term debts that force higher taxes putting them at a competitive disadvantage for new jobs and drive professionals out.
- protomyth 11y ago
  > The Federal government does the same and much of it is for similar reasons, should it be prevented from doing so? Yes, a hundred times yes. This is one of the biggest problems with our tax law and allows politicians, under the guise of promoting businesses and jobs, of bribing people and companies. One law for all. Competing can be done without alterations in tax law to bribe companies. Its a straight up cash bribe and nothing more honorable. All of these deals are made with other people's money. Its bad enough we have status seeking politicians trying to attract sports teams. I look at the absolute bull that FX companies deal with and see all the problems of allowing government bribes.
prostoalex 11y ago

fennecfoxen 11y ago

Expecting to have a government (or a series of governments) work like a "free market" is problematic, because there is no reason to expect that market to be efficient. In particular, no one should expect a free market to be efficient when transaction costs are high. Consider transactions one would have with a regional government: a family moving from one state to another is expensive, paying a lawyer for your small business to ensure compliance with a new jurisdiction is expensive... even just getting a real conversation with your state-level representative (let alone lobbying for a tax break) is kind of a big deal: has anyone here done it recently? As a result, you would expect concentrations of power to emerge in the form of special interest groups and corporations who can pay those transaction costs more readily. (This is intro-to-Econ level stuff, if you ever care to study the field.)

deleted 11y ago
[deleted]

pbreit 11y ago

Plus, there's no money to dole out without the deal.

rhino369 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? Sure, but that competition should be based on taxes that don't discriminate for and against certain individuals and companies. There is also an argument that allowing states to compete with each other just causes a race to the bottom. Tesla was going to build the factory anyway. The country as a whole is worse off is Telsa is allowed to negotiate away all taxes by forcing states to compete over it.

prostoalex 11y ago
> The country as a whole is worse off In a vacuum environment where it's 50 states and no one else that rings true. In global environment US was already competing at country level, would Nevada be better off if the factory went to China or Mexico?

LordKano 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? Of course they should but I believe his objection is the sweetheart deal for one company. For example, if Nevada wants to compete with Arizona, it should lower its tax rate. It shouldn't be able to keep the tax rate high and offer a deal to one company that eliminates taxes for them and for them alone. It provides one company with an unfair advantage over any potential competitors.