[bellerocky]

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.

[anigbrowl]

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.

[GreenPlastic]

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.

[pooper]

While I am immensely happy as a Tesla cheerleader of sorts, I am not entirely convinced that these deals are good either.

[cmsmith]

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.

[sounds]

You have a point when it comes to sports teams, but not factories.

Factories will _not_ "still get built" if somewhere else is a more favorable economic deal.

See manufacturing's move to Asia, from 1970-present.

[cynicalkane]

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.

[Shivetya]

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.

[GreenPlastic]

Personally, I think the money is better spent in Tesla's hands than in the state government's hands.

[fiatmoney]

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.

[thaumasiotes]

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.

[bmmayer1]

This is not an investment, it's redistribution.

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.

[jack-r-abbit]

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.

[bluthru]

>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.

[onetimeusename]

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.

[nugget]

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.

[refurb]

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.

[Afforess]

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.

[gph]

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.

[bmmayer1]

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.

[bluthru]

>then the deal is a net positive for everyone, job-seekers, Nevada, and Tesla.

No, it's a net gain for Tesla and maybe Nevada, but that's about it. Tax abatements reduce the corporate tax burden and shift it towards individuals.

[mlinksva]

It is negative sum for the world.

[untog]

That's the theory, yes. But there have been a number of times when that has not worked out:

http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-ban...

“Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.”

[mendort]

Oh my goodness. We can't know what causes of a phenomenon are simply by observing it? Stop the presses.

[_delirium]

> 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.