Direct Sales OK Baked Into Nevada's $1.3 Billion Incentive Deal With Tesla

The new battery factory that Tesla has announced it will build in Nevada comes with some nice perks: specifically, with a package of tax incentives, road construction, and legislative protection from the kind of dealer cartels that have hindered Tesla's ability to sell cars in some other states. A Bloomberg wire story gives some details about the size of the deal that Nevada made to attract the company: The biggest chunk of the deal, Tesla's sales tax exemptions, is worth an estimated at $725 million. In addition, the company would save more than an estimated $300 million in payroll and other taxes through 2024. ... Among the bills approved in both houses was a provision phasing out and eliminating 1970s-era tax credits for insurance companies, which backers said would free up about $125 million over five years beginning in 2016 for transferable tax credits to Tesla. The package would also gut a pilot program approved just last year giving tax credits to the film industry, freeing up about $70 million for Tesla. ... Lawmakers also agreed to buy right of way to build a road connecting I-80 and U.S. 50, a project estimated to cost $43 million that will improve access to the industrial park from other regions of the state.

Comments

Why is this legal in the U.S.?

[Anonymous Coward]

As a non-American, I find the notion a government exempting one specific company from one or several taxes bizarre. Is this really legal in the U.S.? Why?

Re:Why is this legal in the U.S.?

[Kkloe]

as a non-american, your country probably has\makes the same deal with major industries, you probably just dont know about it

Re:Why is this legal in the U.S.?

[smooth wombat]

It happens regularly in this country. The taxpayers get the shaft so private industry doesn't have spend their money. Our football teams (U.S. football, not your football), when they need a new stadium, threaten to take their team to another city unless the taxpayers cough up their money to build the new stadium and related matters, while the team continues to charge exorbitant prices.

This country wastes hundreds of billions of dollars each year by making sure private industry doesn't have to suffer the pangs of going out and getting financing for its projects like the rest of us do when we want to buy a home or do major repairs.

Don't forget we used several trillion dollars to prop up our banks and financial firms when, through their own incompetence, our financial system went into meltdown. These folks then used the taxpayer money to give themselves bonuses for the great job they did AND have told us taxpayers to go pound sand any time it is mentioned they should thank us for protecting them.

For all our talk about free markets and capitalism, we are incrementally closer to fascism than we are to a representative democracy. Industry, as a whole, gets what it wants, even if it means the taxpayers have to bend over and take it.

Re:Why is this legal in the U.S.?

[wile_e_wonka]

This factory is expected to be gargantuan and will employ a great many smart people with good paying jobs. The factory will have a great many trucks going in and out. The money going to pay these people is coming from the income from a California company. So, well paid engineers will receive California money to purchase houses and furniture and food, etc. in NV. The engineers will pay sales taxes, property taxes, and will spend money in the casinos (I almost mentioned income taxes, until I remembered that NV doesn't have a state income tax--they have casinos instead). The calculus that NV is making with this deal is that the tax revenue it is giving up from Tesla will more than be made up for by the cut of the income they keep from the money that Tesla will pay to its employees and to NV truck drivers and suppliers, etc. The thought is that this will be a net positive for NV.

Re:Why is this legal in the U.S.?

[SydShamino]

At least the tax breaks for Tesla make more sense than the ones for the film industry. States continuously try to attract film and television through massive incentive programs, but they only work if the state has one of the best packages at the time of filming a particular film or season.

Texas had a good package for a while, and things were filmed here. Other states got better, and shooting moved to places like Louisiana. Right now Georgia has a great package and things like The Walking Dead and Archer are shot there, but don't for a moment think The Walking Dead wouldn't move to Louisiana or Arkansas or northern California if the incentives changed.

It's much more difficult for Tesla to move their factory, since they'll have extensive immovable infrastructure costs. The film industry is used to packing up every 6-26 weeks as films or seasons end.

Re:Why is this legal in the U.S.?

[weilawei]

As an American, I also find it really fucked up.

Re:Why is this legal in the U.S.?

[knightghost]

Most countries are just sneakier - they have government officials embedded in "private" corporations. France and China come to mind. Other countries indirectly support their home grown monopolies through technicalities.

Re:Why is this legal in the U.S.?

[mspohr]

In Nevada, they can't write a law exempting a specific company from taxes, etc. but to get around this they write the law with enough specifics to practically make it apply to only a specific company.
In Tesla's case, the new law says "any company" which invests at least $3.5 billion and manufactures electric cars... etc. so theoretically another company could qualify for the exemption but not likely to find another company which meets all the criteria.

Re:Why is this legal in the U.S.?

[Ralph Wiggam]

This is the correct answer. Northwest Nevada is currently an economic wasteland. The plan is to make it a central hub of the US battery design and manufacturing industry. That applies to a lot more industries than just electric cars. If that plan works, any tax revenue they give up in the short term will be more than made up in the long term.

Re:Why is this legal in the U.S.?

[jfengel]

There is a certain amount of lock-in to the film incentives, especially for TV series. Shooting a film requires a substantial amount of infrastructure, both personnel and equipment, which doesn't exist everywhere. These people are often not employed by the studio directly, but form local service companies. And where those companies exist, it's easier for more film projects to move in.

Even if Walking Dead were to pack up and move, Georgia may still have accomplished its goals with the subsidies. I know that Maryland is similarly pushing this. They developed a lot of that infrastructure a while back during the filming of Homicide in Baltimore, and there have been a lot of follow-on projects. They're now trying to boost that with House of Cards, which is an enormous undertaking that employs many hundreds of people (at least part time). The resources of material and knowledge built up in the local economy attract other film projects that can do the job faster and better because it's already here, rather than building it up from scratch.

Of course, producers know that, and will drive up the price as far as they can. Maryland nearly lost House of Cards in a kind of game of chicken; neither side wanted the production to move but each wanted to get a better deal. In the end, House of Cards largely won, and people in the local film industry are extremely happy about that. I don't know if it's really a good deal for the state in the end, but at least for the moment it's employing a lot of people, and since it's a series they'll go on having work to do for a while.

Re:Why is this legal in the U.S.?

[mythosaz]

These poor Nevada citizens, winning the bidding war for thousands of new jobs, plus plenty of taxes than the ZERO they'd collect if Tesla went elsewhere.

Poor, poor, Nevada.

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I never liked those state/city incentives

[gurps_npc]

Not the legal protections (those are fine), I mean the monetary incentives.

They are anti-competitive, and bad for the economy.

Frankly, the federal government should put a user fee on them at a prohibitive rate - i.e. 50%, paid out of the money given.

That is, if a state wishes to give a benefit worth $100 million to a company, that company owes $50 million paid immediately.

These things are usually paid to convince someone to build X in Y state, rather than Z state. It is almost never paid to get something built inside the USA, rather than outside the USA.

As such, any benefit to that particular state is outweighed by the loss to another state.

It is even worse when it comes to sports teams. Then, usually the teams make out like a bandit without in any way increasing the economy of the state (in particular, big cities will always get sports teams, even if the city refuses to build a stadium, because the city is where the CUSTOMERS for sports teams live. People in NYC are not going to suddenly decided to root for and see baseball in New Jersey if the Yankees and Mets leave the city. Not even if the stadium is build in Hoboken. Instead, some other team will build a stadium in New York, earn a ton of money from New Yorkers coming to them, then buy good players and suddenly everyone will be rooting for the NYC Metros, or whatever they call themselves (just like New Yorkers don't still root for the Dodgers, after all.)

Re:I never liked those state/city incentives

[WillAdams]

Now, now, you can't go criticizing sports teams when the N.F.L. is a non-profit organization which exists for the good of the game and to enhance the beneficial effects which the game has on society, right? I'm sure the goals of the other sports organizations are as noble and that their bookkeeping is similarly transparent.

I'm sure that it's some bizarre, pestilential outside influence which has banned community ownership of teams (save for the grand-fathered-in Greenbay Packers) and required that a minimum percentage of a team be owned by a single individual.

Re:The dealership model is broken

[Anonymous Coward]

Most options do not involve simple add-ons, but fundamentally different components or treatment (engine types, upholstery, paint colour). There is no such thing as a vanilla model.

What you propose is essentially moving the final assembly to dealerships. That is much less efficient, it would require massive dealerships with massive investments and the only benefit would be that cars can be delivered somewhat quicker.

Re:The dealership model is broken

[Anonymous Coward]

aftermarket maintenance

That is a fantastic way to say "oil change". Thank god we have these precious dealers to bequeath unto us their holy ritual that we mere mortals are unable of performing. And let us not speak of those ne'er-do-well dens of scum and villainy known as ANY OTHER MECHANIC.