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Why the $1,3 billon Tax exemption for Tesla?

Why the $1,3 billon Tax exemption for Tesla?

I supported this company because it contributed to the US economy, not because of tax evasions. So why does the Tesla deal include $1,3 billion in excempt taxes the Nevada citizens will have to pay for.

Why not just pay the taxes, is there a reason why Tesla can't just create jobs without avoiding taxes in return or something? Why not contribute to the state?

centralvalley | 14 settembre 2014

Fruity, this is a complex area to grasp fully.

Briefly,

Nevada has no state income tax, so there is no loss of revenue to the State of Nevada in this area.

There will be countless jobs created both in the construction of the plant and within the plant. Many people who will be employed are now unemployed or underemployed. They will go off the dole when they start working, so tax dollars are saved.

These new employees will require goods and services that are not available now, so new jobs and companies will spring up that will boost the economy in Northern Nevada, and so on. People a lot smarter than I have models to determine the so-called ripple effect that these job creations have on a localized economy.

There could be other companies that might relocate or expand to this area because the infrastructure will already be in place, thus creating more employment.

So, this may seem extravagant in the near term, but if we believe that the Gigafactory will achieve anywhere close to the ideals advanced by Tesla, the payback to Nevada and consumers will be many fold greater.

These concessions and benefits are only for a finite period. If I recall correctly, the payroll tax break is only good for ten years, and the real, personal and sales tax exemptions are good for twenty.

It takes money to make money, and the more money that Tesla retains, the better the chances are of really making an impact in the BEV market and for its long-term success!

negarholger | 14 settembre 2014

If you divide $1.3B by 20 years it is an average of $65M per year... does that sound more reasonable?

$65M divided by 50 GWh is $1.30 per kWh.... at target cost of under $100 per kWh that is significant to help the GF to be successful.

Brian H | 14 settembre 2014

Kleist;
Also, that "50 GWh" is annual production capacity not a cumulative output total. So even $1.30 is many times too high.

Remnant | 14 settembre 2014

Doe someone happen to know which specific taxes are part of this exemption?

DTsea | 14 settembre 2014

Nevada residents don't 'pay for' tax breaks. These are taxes that would NEVER BE COLLECTED IN THE FIRST PLACE if Tesla doesnt put the factory there.

The net impact to Nevada will be an INCREASE in tax receipts as the many employees and suppliers begin getting paid.

negarholger | 14 settembre 2014

Brian - yes, both is annual... $65,000,000 / 50,000,000 kWh = $1.30 per kWh

At about $20 per kWh factory cost the $1.30 is substantial - Elon is fighting for every penny here.

JeffreyR | 14 settembre 2014

+1 @DTsea and @CentralValley

NV definitely gains by enticing Tesla. And, Tesla gains by getting the costs per kWh as low as they can (while still being conscientious of their impact on the environment) as @Kleist points out. This a situation where government incentives are really helping the common good.

I wish they could have made TX work simply to make "the hair" push a pro-Tesla sales bill through. Maybe for the next one.

NumberOne | 14 settembre 2014

It is very costly to build a factory such as what Tesla is building in Nevada. Just like I get a tax credit for my Tesla purchase (one time, an not to exceed my tax liability,) that does not cost other taxpayers anything because it only applies to money that came from me in the first place.

In the case of Tesla, it is important to look at the big picture. 6500 people will be working there. There probably will not be sufficient housing, which will create a construction boom as people relocate and build sufficient funds. The there is the fact that people shop and go out to restaurants. Educational institutions in the area are also likely to benefit through funding from Tesla, and internships at Tesla etc. There may be no income tax in NV, but people pay sales tax and other taxes which will be of great benefit to the local and greater economies.

Rocky_H | 15 settembre 2014

Any time a company is going to build a big facility somewhere they get these kinds of offers from several states who want to have the facility built there in their state. So no matter which state Tesla chose, they would have gotten a big tax incentive offer. So this always happens, and it's not unusual.

You just happen to be paying attention to Tesla, so you saw this story. Do you notice when this happens a few times a year with other companies and factories?

buddyroe | 15 settembre 2014

Strange that Ford is 7th on the list of total tax breaks and subsidies over the last 10 years, yet everyone focuses on Tesla. I guess when Kansas did the same for Ford a few years ago, no one even paid it any attention because they are so used to Ford, GM, Exxon, etc getting these kind of breaks constantly.

tpmeyer | 15 settembre 2014

The short answer is that the tax burden in the United States is one of the highest in the world. It is very difficult to run a profitable company and pay all the requisite taxes. The only way for many companies to remain in the US is to get waivers on taxes. Nevada isn't really giving Telsa anything. They are just promising to take less from them.

apsley | 15 settembre 2014

Why did we have to bail out GM and Chrysler when they went bankrupt (Chrysler has gone bankrupt twice) ?

Earl and Nagin ... | 15 settembre 2014

Here's a novel answer to the OP's topic question: Because if NV hadn't offered it to Tesla, Tesla might have built their GF somewhere else.
Isn't the government always telling us that competition is good?

carlgo | 15 settembre 2014

The real problem is fairness. If one corporation gets a break, what about the others? Clearly, the end result is that all states will eventually drastically lower corporate taxes in order to keep the jobs.

Their employees will pay the taxes, one the corporations mostly dodge now anyway.

Brian H | 15 settembre 2014

Fairness has little to do with this kind of decision. States or governments can't make programs retroactive; the complexity and cost would explode "Beyond All Recovery". Demanding such things is like the Cloward-Piven "Overwhelm and bankrupt the state to force the revolution!" ploy.