
Nevada’s $1.3B gamble on Tesla - ghosh
http://www.theverge.com/2016/2/8/10937076/tesla-gigafactory-battery-factory-nevada-tax-deal-elon-musk
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sandworm101
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.

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danhak
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.

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protomyth
> 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.

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Shivetya
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.

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protomyth
> 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.

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fraserharris
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.

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bryanlarsen
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'.

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Avshalom
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...

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linkregister
Which is more than funded by the workers' property taxes, income taxes, and
sales tax revenue.

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hackbinary
Why should the 'workers' pay higher taxes, and the 'company' pay lower taxes?
What makes that a morally just argument?

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prostoalex
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.

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danhak
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?

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lotsofpulp
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.

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rubidium
That's what pretty much all companies do with these deals.

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sandstrom
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.

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prostoalex
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).

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

