Pyrrhus Would Understand
Remember that “big victory” we heard about recently for the state of Nevada? You know, the one where Tesla Motors announced that they would build their huge, $5 billion, high-tech battery factory in Nevada vice California, Arizona, Texas, or New Mexico?
Well, that victory apparently came with a price: somewhere between $2 billion and $3 billion in tax incentives from Nevada. That works out to somewhere between 50 and 60 percent of the cost of building the Tesla-owned facility.
From Tesla’s latest regulatory filings:
The total capital expenditures associated with the gigafactory through 2020 are expected to be $4-5 billion (sic), of which approximately $2 billion is expected to come from Tesla.
And where will the rest of the money to build for the factory come from? Nevada taxpayers will be on the hook for it. That’s kinda how tax incentives work.
There are a few other things about the deal that would bother me if I were a Nevada resident, too. Like the fact that Tesla currently has roughly $2.6 billion in cash – and around $4 billion in liabilities.
There’s also this:
“Tesla has also disclosed its overhead costs are now rising 20% on a year-over-year basis, and research and development expenses are increasing 30%.”
Finally, Tesla’s current business plans project that they’ll be making (and, presumably, selling) 500,000 electric vehicles annually by 2020. Tesla also expects their new battery factory to reduce costs of battery pack production vis-à-vis current sources by more than 30% per-killowatt-hour.
Somehow, I just don’t see both of those happening.
Hey, I hope this works out for the good people of Nevada. But I can’t help thinking – based on what we’ve seen from other similar “green energy” boondoggles efforts going belly-up over the past few years – is that there’s a better-than-even chance they’ll end up quoting Pyrrus of Epirus concerning the Battle of Asculum:
“One more such victory, and we shall be undone.”
Category: "Your Tax Dollars At Work", Economy, Global Warming
$3 billion over six years? Even for Nevada, that’s a good hunk of coin.
How much of that goes into the pockets of Harry Reid and family, pray tell?
I’m thinking that Reid & Reid are likely getting a taste of everything that happens in Vegas.
I doubt if anything moves in Nevada until the reid family gets its palms greased. I wonder how much in bribes )*OOPS* campaign donations)he got out of them?
These are the sorts of projects that the good citizens of a state should be voting on. Either yea or nay. If they are going to be on the hook for the money, then they should be getting a say in that whole process.
I happen to like Tesla and it’s vehicles. I probably won’t ever be in a position to afford one, but I think they’re pretty neat.
Having said that, I’ll also state up front that NO taxpayer funding should EVER be paid out in support of such companies, corporations and/or ventures. Nada. Zero. Zip. If the company can’t find the investors to support it, then maybe they ought to be rethinking things.
And, oh by the way, the Frikkin’ Chinese are doing their collective damndest to buy up battery production all around the world. Is there any codicil in this agreement that prevents the company (Tesla) from selling out to the frikkin’ Chinese once the taxpayers are committed to funding this potential boondoggle?
We need to develop graphene based capacitors to make batteries as relevant as buggy whips.
Taxpayer money can and should be used for major projects; public and private. There should also, however be stipulations a la the Trans-Continental Rail-Road. Either you get this done in the time you said you would at or under cost, or you’ll have to pay every penny back with interest.
Stipulations like those I can get behind. Tax abatements with no other requirements are stupid and are going to place a huge burden on the state if Tesla should fail, which I hope they do not.
On a different note, if I remember reading right, Tesla isn’t just making the battery packs for it’s own cars, but is also selling them to other auto manufacturers for use in their cars as well. This helps make the numbers a little more in Tesla’s favor.
Let’s not forget that they also released all their patents to the public to help bring the cost of future cars down. They also plan on having 90% of their cars made now capable of auto pilot via googles setup in a year. Googles cars have had zero wrecks while the computers drove them to something over a million miles and counting last time I heard. Some of their cars even have their own drivers license.
Old fashioned corporate welfare…follow the money back to 1600 Penn Ave. A horde of Obama/DNC donors have part ownership in Tesla…including some of the richest men on earth (Google founders Sergei Brin/Larry Page & former Google CEO Eric Schmidt). Pres Bam promised to be a different type of pol, but…the song remains the same.
President shit for brains promised a lot of things. Funny thing is; even after everyone knew he was a lying POS, he still got voted back in. That tells you all you need to know about the electorate.
Yeah, I thought we were supposed to be taxing corporations more, not less. And taxing the rich too… you know those Tesla customers.
Tesla better watch their six. Today it is a “tax incentive”. When they fall from grace with the libtards, it will be re-phrased as a “tax loophole” and they will be vilified.
Yet one more case of political gamesmanship and horse road apples for those politically connected…
This will turn out the same as all the other “green jobs” pushed by the left and paid for by the taxpayers.
With the balance sheet for Tesla being as bad as it is, I would imagine that bankruptcy is following about 6 months after the taxpayers have paid all the bills for them.
And guess who is left holding the bag on it…
I’ll give you 3 guesses and the first 2 don’t count…
Stupid, stupid, stupid lib’s…
I hope you guys don’t shoot me for saying this, but giving them tax breaks is not the same as handing them over free taxpayer money. It is more like letting the company keep their own money in lieu of having the state confiscate it.
What I don’t get is the hypocrisy. Tesla was founded by Elon Musk. Elon Musk is a rich guy and should be taxed more, not less. Tesla customers are rich, they should be taxed more, not less. The taxes involved should just be passed on to the customer in the retail price like most of the rest of “the unchosen” companies do. Nevada wants jobs. Ergo, raise taxes… do not cut them (idiots). //sarc
What this story actually says to me is “In an effort to create jobs, we have agreed to decrease taxes on a rich guy’s company so that he can make more profit selling his product to his rich customers.” I really don’t have a huge problem with that other than the hypocrisy involved. What this actually does, is it subsidizes the Tesla customer by lowering the retail price. Supply and demand dictates lower price=higher demand. Funny how the liberals will go along with the law of supply and demand with virtually anything other than The Minimum Wage issue.
I have never had a poor guy for a boss. Now I am self employed, and I am not rich. The State didn’t offer me any tax breaks to get started. Conversely, they always have their hand out.
While the bulk of Tesla’s deal with Nevada is in the form of abatements (which is essentially a form of targeted tax exeption), not all of it will be. According to this source, approximately 21% of the incentives will be in the form of transferable tax credits, subsidized rates for electricity, and roads built to support the plant at state cost by the state of Nevada. Those will all be direct costs to the state of Nevada – and thus Nevada taxpayers.
To the Nevada taxpayers, it also doesn’t matter particularly whether or not the Tesla tax incentives are direct costs to the state of Nevada (21%) or are tax breaks for Tesla. State revenue needs are effectively a zero-sum game (they shouldn’t be, but reality is that they are). If Tesla is given a special “abatement”, then other taxpayers must pay higher taxes in order to raise the same amount of money. Thus, from the perspective of Nevada taxpayers Tesla’s tax abatements function precisely the same as direct payments: they raise other Nevada taxpayers’ taxes, or lead to increased state debt.
Either way, Tesla is lining it’s pockets with (depending on the source and accuracy of the estimates) between $1.4 and $3.0 billion of money that would otherwise be Nevada tax revenue. Helluva sweet deal if you can get it.
The factory is also projected to lead to the creation of approximately 6000 jobs. Since Nevada has no state income tax, it will IMO take one helluva long time to make up even the $1.4 billion lower estimate of what Tesla is netting on this deal. It will obviously take well over 2x as long to recap the upper estimate, particularly when the time value of money (e.g., the effects of inflation) are taken into account.
I’m guessing Nevada won’t ever get it’s money back from this deal, and would have been better off “losing” this one. I could be wrong.
I agree with your analysis the way you present it. I was thinking of it primarily from a property tax perspective. If Company A takes a piece of desert, creates a “gigafactory”, and does not pay property tax for the first 5 years on the improvements = no direct cost to taxpayer.
I had this discussion 20 years ago or so with a co-worker in regards to tax incentives being offered to Motorola, AMD, and IBM in Austin, TX by the city/county/state taxing authorities. I think it has proven to be a win/win for Austin, although I moved away shortly after those incentives were announced. Motorola, AMD, and IBM have a far more viable business model and product IMHO.
As far as “Helluva sweet deal if you can get it.” I agree. No one from the state has indicated giving a rat’s ass whether I survive or not. And this is me, not holding my breath.
Even the tax breaks in this deal are mostly different than the ones you describe, GDContractor. Here, if I understand the deal correctly, as tax breaks Tesla is getting either (1) a sales-tax break on materials/equipment purchased for 20 freaking years, or (2) a business/property tax break for a decade. They might be getting a combination.
The first option is simply transferring their legitimate sakes tax burden to other Nevada taxpayers. As for the latter: hell, if I bought a piece of property and built a business on it, I’d love that same deal. So that’s also effectively simply transferring their tax bill (which would otherwise be a cost of doing business, and would be recouped in the cost of their products) on to other Nevada taxpayers.
Hell, if Tesla ends up selling battery packs to other electric/hybrid vehicle manufacturers, Nevada taxpayers might even end up subsidizing rich
pricksindividuals drivingPrickmobilesPriuses, Leafs, and Volts in DC or SF. That ought to make the Nevada taxpayers feel very happy.The only issue I have with your characterization from the property tax perspective is that currently the Nevada Taxpayers presumably have an unimproved piece of land generating very little tax revenue. By improving the land and not being charged higher tax on it, I don’t see how that transfers their tax payment to someone else.
The taxpayer misses out on lost revenue, I agree. But that “lost revenue” did not exists prior to the improvements being made. I do not see it as “Hey Tesla didn’t pay any property taxes so now you guys have to make up there share in addition to what you already pay.”
Ditto for sales taxes. The sales tax revenue from their purchases did not exist a priori (I hope I am using that term correctly).
The tax burden would only be transferred to the other Nevada taxpayers if the State raised their tax rates because of this deal they are making with Tesla.
I grant that Tesla will benefit from State infrastructure and services without shouldering their load for several years…. but that’s what tax incentives are. Unless I am missing something, which is probable. Speaking from personal experience, I generally think taxes are bad and are a tremendous barrier to entry for all small businesses. In the state of Texas I am subject to Sales Tax payments, Sales Tax Collection, Property tax, Franchise Tax, Energy Tax, Workers Comp Tax, Unemployment tax, and there are probably several others I am unaware of. In exchange, I generally feel like I get an unfeeling bureaucracy that is primarily interested in wasting money and padding their pension funds. I guess I need to “go green”.
The taxpayers of Nevada end up shouldering Tesla’s burden because state revenue needs are effectively a zero-sum game – regardless of whether or not Tesla builds their plant (yes, I’m ignoring the essentially negligible contribution to state revenue needs of the relative handful of people that Tesla will attract from out-of-state). Since revenue needs are effectively static, then the state needs to raise roughly the same amount of money whether or not Tesla builds its factory. This holds true afterwards. Since the revenue generation is from taxation which must raise more or less the same amount of money, it is effectively a zero-sum game. If someone pays less, someone else will perforce pay more. Nevada has no income tax. Ergo, property taxes, sales taxes, and business taxes are major components to Nevada’s revenue stream. Thus, if Tesla is “exempt” from property taxes for 20 years – or from sales taxes for 10 – their tax burden must be taken up by the other taxpayers (individual and corporate) in Nevada. In effect, they’ve shifted part of their tax burden to other state taxpayers vice including it in their prices as a cost of doing business. Consider your own finances. Assume you have a hypothetical mortgage payment of $1500 per month. That need is fixed; the money has to come out of your budget each month. If you are counting on someone paying you $500 periodically in repayment for a debt to pay part of that mortgage and he/she cannot pay for the next 10 months because they lost their job and you forgave the loan, you still have to find that $500/month somewhere. It will come out of your other sources of funds – savings, discretionary spending, a second mortgage, retirement accounts, whatever. Or you’ll lose the house to foreclosure. That’s precisely what Nevada has done to themselves here. They’ve told Tesla “don’t worry about paying us what you owe for 10 (or 20) years – we’ll forgive you that, and get the money we need somewhere else.” That’s a sweet deal if you can get it. But it kinda screws… Read more »
That last line should say : “I guess I need to “go green” but I can’t afford the lobotomy.”
Tesla motors, another lie perpetrated by the green energy people on the public. nothing like a car that costs $70k and gets about 200 miles and needs a new battery swap or 6 hours to recharge….if you want another 65 miles of range you get the 85kWh battery for another 10,000 dollars…
Electric car for the masses my ass…it’s time we state the obvious, batteries are great for phones and camcorders and suck copious amounts of ass for automobiles. We have other technology that makes actual economic sense and provides a logistic benefit to moving goods and people.
Even with your $7500 federal tax credit for buying a Tesla it’s a rich man’s toy car and studies show that no one who has one has it as their only transportation because of the lack of range and access to quick and efficient recharging. Tesla actually advertises a 30 minute wait time for a “supercharge” that will get you a whopping 170 additional miles….I get a range close to 500 miles and it takes all of 3 and half minutes to swipe my card and refuel, and that 500 miles takes me through a couple of weeks of travel time.
Tesla, the best battery car you can get…and that’s the shame of it.
Haven’t there been issues with Teslas catching on fire like Chevy Volts?
There were indeed two incidents where a Tesla caught fire and was destroyed. Federal authorities investigated and “cleared” the automobile’s design afterwards. However, Tesla also added underbody armor to the car to reduce the chances of recurrences (the fires were apparently caused by something striking and damaging the batteries).
http://www.wired.com/2014/03/tesla-feds-armor/
This is what happens when you live next to Southern California. The liberalism spreads like a virus. I’ve been in Las Vegas half my life and I still have yet to find someone who actually voted for Reid. Half the liberals are illegal. The other half are meth heads. But electric cars that cost more than the average price for a home here are good for our local economy right? Especially in a desert environment hot enough to fry batteries…
And don’t forget about Ivanpah. $3 billion for a 330 MW solar plant which was promised to have an availability of 31%. Compare that to the 95-98% availability of a coal or nuke plant.
Oh, but they can’t even meet 31%, cause now they want to use more natural gas for after it gets dark…
Right. The solar plant built by nevadans thats ten miles southwest of Las Vegas. Also supposed to help our local economy except for the small technicality of it being on the California side of the state line. I run into hippies at UNLV all the time that still think it helps with our energy costs. Then again they are a product of the worst educational system in the country…