Newspaper column: Tesla tax deal fails on principle, economic viability

The deal the governor and the state Legislature cut with Tesla Motors to lure its proposed $5 billion lithium-ion battery plant to Nevada trammels the fundamental principles on which this nation was founded and is economically naïve.

The deal would allow the battery manufacturing facility to operate tax-free for a decade if it invests $3.5 billion here, eventually amounting to tax exemptions and credits totaling $1.3 billion. The state also agreed to spend $100 million to build a highway linking the site to U.S. Highway 50 in Lyon County.

Nevada was in a bidding war with Texas, California, New Mexico and Arizona for the plant, though Tesla had already built the earthen pad for a plant in the Tahoe Reno Industrial Center, as recounted in this week’s newspaper column, available online at The Ely Times, the Elko Daily Free Press and the Mesquite Local News.

Governor shows off new state name. (Getty Images via KNPR)

The governor claims the deal will bring in some $100 billion to Nevada’s economy and employ 6,500 directly in the factory, and result in thousands of indirect jobs.

Is that so or has Nevada been hoaxed?

In a Washington Post article in July, Nathan Jensen, a political science professor at George Washington University, said of such bidding wars for companies:  “It’s a zero-sum game.”

If Tesla is successful and hires 6,500 workers to build electric car batteries, might a gasoline refiner lay off 6,500?

Simply shifting companies from one state to the next does nothing to create new jobs, Jensen said, but still states and municipalities across the country are encouraging companies to relocate, at a cost of about $70 billion a year in taxes taken from one pocket and placed in another.

Jensen has compared job creation by companies in Kansas that were attracted to open there with huge tax incentives to similar firms that got no handouts. He found that six years after incentives were awarded, “the firms who received incentives actually generated slightly fewer jobs than those that didn’t receive incentives.”

In December 2012, The New York Times published a lengthy article about all the tax incentives given to companies and reached the same conclusion: That incentives generally amount to a zero sum game.

General Motors had gotten lucrative tax breaks from states and communities for years. But the company closed 50 facilities and walked away, only to be bailed out by federal tax dollars.

Richard Florida, director of the Martin Prosperity Institute at the University of Toronto and Global Research Professor at NYU, recently wrote of the Tesla incentive package, “But no matter how you slice it, the deal makes utterly no sense. It is just one more example of a government giveaway for a factory that would have been built anyway. As I’ve argued before, there is virtually no association between economic development incentives and any measure of economic performance. And it’s not just me. I spoke with several experts in economic development incentives and advanced manufacturing and the consensus was the same: this deal was overblown and unnecessary.”

He argues that companies are just gaming government officials. He calculated that when a realistic number of actual Tesla jobs to be created is used that the tax incentives would amount to $385,000 per job.

The proponents argue that it is OK to let Tesla come to Nevada tax-free because it would not have gotten any taxes anyway if it built elsewhere and its workers will pay taxes. If workers pay a sufficient amount of taxes to cover the services provided by the state, why levy a tax on any business?

The Nevada Constitution takes a very principled stance on taxation, dictating, “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation …”

But then in 1982 on the heels of the fuel crisis of the 1970s the Constitution was amended to add a loophole big enough to drive a $100,000 Tesla sports car through: “The Legislature may exempt by law property used for municipal, educational, literary, scientific or other charitable purposes, or to encourage the conservation of energy or the substitution of other sources for fossil sources of energy.” Electric car batteries might fit the bill.

But the Constitution also says, “In enacting an exemption from any ad valorem tax on property or excise tax on the sale, storage, use or consumption of tangible personal property sold at retail, the Legislature shall: Ensure that the requirements for claiming the exemption are as similar as practicable for similar classes of taxpayers …”

A lot of companies would like a similar deal, but can’t reach the $3.5 billion threshold.

Then there is that 14th Amendment to the U.S. Constitution that says neither the United States nor any state may “deny to any person within its jurisdiction the equal protection of the laws.”

If one entity must pay taxes and another does not, that is hardly “equal protection.”

Here are other comments on this topic: John L. Smith, Sherman FrederickJohn KerrSteve Sebelius, Richard Florida, WSJ editorial, R-J editorial, Chuck Muth, Jon Ralston, Fox Business News, NNPR,  Michael Chamberlain, another Michael Chamberlain, NPRI, John Lee, Brian Greenspun, Harry Reid, Dean Heller, LA Times.

Some are better than others.

Handing out arms to just anyone in Syria?

Nevada Congressman Joe Heck made a strong argument against handing out arms to the so-called Syrian rebels.

“This is a plan that is destined to fail for the sake of saying we did something, and that I cannot support,” Heck said in a speech reported by the Review-Journal, adding he had little faith in the our ability to control and monitor those who are supposed be fighting.

“It’s a ragtag collection of 100 disparate groups,” Heck said, noting it “has no cogent leadership, no organization, no command and control.”

Frankly, this is like handing out guns to Chicago street gangs and telling them to keep the peace.

Or maybe it would be like giving guns and rocket launchers to the mujahidin so they could fight the Russians. They still had some left over after 9/11.

Rep. Steven Horsford was the only Nevada House member to vote for it.

A little constitutional contortion on this Constitution Day

An alert reader sent along a copy of an email from the city of Las Vegas Film Office, announcing the observation of Constitution Day, er, Citizenship Day.

The email reads:

September 17, 2014 is
Citizenship Day

Citizenship Day (also known as Constitution Day) marks the anniversary of the ratification of the U.S. Constitution on September 17, 1787. It also recognizes all who, by coming of age or by naturalization, have become citizens.

The origin of this holiday dates back to 1940 when “I am an American Day” was celebrated on the third Sunday in May. In 1952, Congress moved the date to September 17 and renamed it “Citizenship Day.” In 2004, the official name changed to “Constitution Day and Citizenship Day.”

To celebrate this holiday, schools around the country receive federal funding to provide lessons about the Constitution. Take a moment today to reflect on the Constitution and what it means to be a U.S. citizen!

Two points.

Why does one need a permit to exercise a free speech right?

And since when is federal funding to provide lessons about the Constitution an enumerated power of the federal government?

Take a moment and reflect on how it feels to be a serf.

 

Happy Constitution Day!

On this day in 1787, the representatives at the Constitutional Convention in Philadelphia signed the Constitution. It was ratified by the states and went into effect on March 4, 1789.

You remember the Constitution don’t you?

That’s the document that says the president “shall take Care that the Laws be faithfully executed …” Not waive, delay or ignore parts of laws the president doesn’t like. Not tell the attorney general to not defend laws such as the Defense of Marriage Act in court. Not use his phone and pen.

Constitution

You know, the piece of paper that says, “All Bills for raising Revenue shall originate in the House of Representatives …”

It’s those four-handwritten pages that give Congress the power “To regulate Commerce with foreign Nations, and among the several States …” Not to force people to engage in commerce or pay a fine or a tax for not doing so.

They later added the Bill of Rights, which says such things as “right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

It also gave Congress the power to “declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water.”

The instrument also says the “President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.” Not decide for himself when the Senate is in session. At least the court slapped his wrist on that one.

The First Amendment of those Bill of Rights says Congress “shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof …” That probably means Congress can’t order a religion to pay for contraceptions, abortifacients and sterilization against its beliefs.

I’m pretty sure the document did not envision a president’s administration creating by regulation laws the Congress refused to pass — think immigration enforcement, EPA, FEC, HHS, HUD, USDA.

As James Madison said, “I believe there are more instances of the abridgement of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations.”

Happy Constitution Day.

Nevada put all its tax incentive eggs in one technology basket

Did Nevada just double down on Betamax or VHS?

You remember the video tape format war of the 1970s? Both performed fine, but only one survived to become the standard. VHS won.

So it is with non-polluting cars.

Betamax vs. VHS

There are the all-electric vehicles, like Teslas, in which Nevada just “invested” $1.3 billion in tax breaks and credits for the next 20 years.

Then there are hydrogen fuel cell cars like the ones being built by Toyota.

Neither produces pollution while operating, but which will win the clean energy car quest? The electric car uses power produced from polluting power plants.

Both have a driving range of about 300 miles.

Neither of them have many places where an owner can recharge or fill up. Both take longer to fuel than pulling up to a gas pump, but the electric car takes eight hours or longer to charge.

Both have a fire danger. Lithium ion batteries have been known to burn in crashes. Who can forget the Hindenburg? But hydrogen fires can be less explosive than gasoline.

Current models of both cars are currently priced near $70,000.

Of course, both the Betamax and VHS are now obsolete, having been replaced by DVDs. Who knows what next generation technology is waiting in the wings — possibly in less than 20 years?

Toyota hydrogen fuel cell car

Tesla Motors all-electric cars

 

It’s not the EPA, now its the ESA — Economic Stimulus Agency

Talk about bait and switch.

We were told that the EPA rule demanding every state to cut carbon output by 30 percent by 2030 was about saving the planet.

Not so, EPA Administrator Gina McCarthy told Congress this summer. It is an economic stimulus program.

She told the Senate Environment and Public Works Committee:

“And the great thing about this proposal is it really is an investment opportunity. This is not about pollution control. It’s about increased efficiency at our plants…It’s about investments in renewables and

Gina McCarthy, head of EPA

clean energy. It’s about investments in people’s ability to lower their electricity bills by getting good, clean, efficient appliances, homes, rental units.

“This is an investment strategy that will really not just reduce carbon pollution but will position the United States to continue to grow economically in every state, based on their own design.”

Never mind that your power bills will go through the roof and so-called global warming will not be delayed one second, it is like the trillion-dollar stimulus program that produced no jobs, but simply moved money from the pockets of losers (taxpayers) to the pockets of winners (crony capitalists like Elon Musk).

 

So much for training Syrian rebels to fight the Islamic State

Syrian rebels

Oops, there goes one aspect the president’s declaration of whatever declared on the Islamic State, which claims to have established a caliphate in Syria and Iraq.

Obama said Wednesday:

“Across the border, in Syria, we have ramped up our military assistance to the Syrian opposition.  Tonight, I call on Congress again to give us additional authorities and resources to train and equip these fighters.  In the fight against ISIL, we cannot rely on an Assad regime that terrorizes its own people — a regime that will never regain the legitimacy it has lost.  Instead, we must strengthen the opposition as the best counterweight to extremists like ISIL, while pursuing the political solution necessary to solve Syria’s crisis once and for all.”

The Hill is now reporting that those Syrian rebels and the Islamic State struck a cease-fire deal today, agreeing to a non-aggression pact in which they promise not to attack each other.

The website noted that this development puts a damper on that call for Congress to authorize money to train and equip rebel groups. You think?