Tax incentives to attract businesses is a zero sum game

The Legislature is meeting in Carson City to rubber stamp a proposal by Gov. Brian Sandoval to snare a new $5 billion Tesla Motors lithium-on battery plant in Storey County by offers the company $1.3 billion in tax exemptions and credits for the next 20 years.

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

Is that so or has Nevada fallen for a hoax?

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

Tesla deal a zero-sum game?

“Simply shifting companies from one state to the next does nothing, at least not right away, to create new openings for the millions of still unemployed Americans, Jensen added while presenting some of his latest economic development research,” WaPo reports. “Nevertheless, nearly every municipality across the country offers some type of tax incentives to encourage existing companies to relocate, costing taxpayers around $70 billion annually.”

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 aways, 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, “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 jobs to be created is used that the tax incentives will amount to $385,000 per job.

The Nevada Constitution dictates, “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation …” But then it has this loophole big enough to drive a Tesla 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.

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.

Let’s hear the argument for rewriting the First Amendment

Apparently there are a few Republicans who have decided it is time to give the Democrats enough rope to hang themselves.

Twenty Republicans — including Nevada’s junior senator, Dean Heller — joined the Democrats to vote 79-18 to begin debate on a constitutional amendment that would allow Congress and the states to limit how much of one’s own money a person or organization may spend on elections and issues.

That means as much as a week of the two weeks the Senate will be in session before the elections will be spent debating an amendment that has no chance of passing. 

Less time to talk about the budget. Less time to discuss immigration, terrorism and even the things the Democrats want to push, such as the minimum wage, equal pay for women and reforming student aid.

Majority Leader Harry Reid, of course, used the occasion to bash the Koch brothers and Minority Leader Mitch McConnell.

“We’ll vote on a constitutional amendment that would bring sanity back to elections and restore Americans’ confidence in our democracy,” Reid tweeted before the vote.

So, let the Democrats start gabbing about how important it is to protect the stupid voters from being exposed to someone’s ideas because they spend money to get their message out. Of course, the press is exempted because they spend no money and have no agenda. Right?

That is the crux of the argument: Voters are stupid. Well, that may be a given, since they elected these buffoons to the Senate.

Justice Anthony Kennedy’s majority opinion in Citizens United v. FEC, which this amendment would overturn, pointed out the wrongness of a law restricting speech by restricting spending:

As a “restriction on the amount of money a person or group can spend on political communication during a campaign,” that statute “necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached.” Buckley v. Valeo , 424 U. S. 1, 19 (1976) (per curiam) . Were the Court to uphold these restrictions, the Government could repress speech by silencing certain voices at any of the various points in the speech process. See McConnell , supra , at 251 (opinion of Scalia , J.) (Government could repress speech by “attacking all levels of the production and dissemination of ideas,” for “effective public communication requires the speaker to make use of the services of others”). If §441b applied to individuals, no one would believe that it is merely a time, place, or manner restriction on speech. Its purpose and effect are to silence entities whose voices the Government deems to be suspect.

Reid would like to silence the Koch brothers, while he would still be allowed to rant on the floor of the Senate.

It would be tempting to call for a gag on Reid, but the more he talks, the more he reveals about himself, his motives and his objective to stamp out liberties.




Avoiding taxes one way is unpatriotic, avoiding taxes another way is, well …

Obama on July 26 on the topic of tax inversions in which a company moves its headquarters out of the country to avoid paying high taxes:

Even as corporate profits are as high as ever, a small but growing group of big corporations are fleeing the country to get out of paying taxes.  They’re keeping most of their business inside the United States, but they’re basically renouncing their citizenship and declaring that they’re based somewhere else, just to avoid paying their fair share.

I want to be clear: this is only a few big corporations so far.  The vast majority of American businesses pay their taxes right here in the United States.  But when some companies cherrypick their taxes, it damages the country’s finances.  It adds to the deficit.  It makes it harder to invest in the things that will keep America strong, and it sticks you with the tab for what they stash offshore.  Right now, a loophole in our tax laws makes this totally legal – and I think that’s totally wrong.  You don’t get to pick which rules you play by, or which tax rate you pay, and neither should these companies.

The best way to level the playing field is through tax reform that lowers the corporate tax rate, closes wasteful loopholes, and simplifies the tax code for everybody.  But stopping companies from renouncing their citizenship just to get out of paying their fair share of taxes is something that cannot wait.  That’s why, in my budget earlier this year, I proposed closing this unpatriotic tax loophole for good.  Democrats in Congress have advanced proposals that would do the same thing.  A couple Republicans have indicated they want to address this too, and I hope more join us.

But when a company moves to one state rather than another in exchange for huge tax breaks for decades to come, that would be patriotic. Right?

I guess it depends on your perspective.

Congress back in session: Your liberties at risk

Congress returns to Washington today and one the first things on its agenda is a vote to rip the free speech heart out of the First Amendment.

The vote on S.J. Res. 19 will take place at 3 p.m. PDT. Passage would start the process of amending the Constitution to allow states and Congress limit spending on elections and issues.

The amendment states: “Congress and the States may regulate and set reasonable limits on the raising and spending of money by candidates and others to influence elections.”

At noon PDT, a number of Democratic senators and representatives will hold a press conference urging passage of the constitutional amendment, which they call the Democracy For All Amendment. It would overturn the Supreme Court decision in Citizens United, which said Congress can’t limit how much someone may spend on politics. In reality, it just makes it easier for incumbents to get re-elected.

Proponents claim that as a result of Citizens United that “the wealthy get to shout, but the rest of you may only whisper.” Since when was a shout more persuasive than a whisper?

In a Wall Street Journal column today Theodore Olson explains the real motive behind it: “Democrats claim that the Supreme Court has made politicians and political parties less accountable by encouraging donations involving outside interest groups. Outside of what? Democrat fundraising circles? Their actual fear is that less traditional candidates — including outsiders — will have the funding necessary to challenge incumbents in primaries without the blessing of party elders.”

Of course, party leader Harry Reid is pushing the amendment. Blame it on the Koch brothers.

Kentucky’s Republican Sen. Mitch McConnell has pointed out that the amendment is unlikely to ever pass, but is being put forward as a political ploy:

“Now, everyone on this Committee knows this proposal will never pass Congress. This is a political exercise.

“The goal here is to stir up one party’s political base so they’ll show up in November by complaining loudly about certain Americans exercising their free speech and associational rights, while being perfectly happy that other Americans — those who agree with the sponsors of this amendment — are doing the same thing.

“But the political nature of this exercise should not obscure how shockingly bad this proposal is.”

In addition to being a senseless and futile gesture, such an amendment would require a huge bureaucracy to enforce, but, of course, we can trust agencies like the IRS to be fair and equitable in that enforcement.

Reid testifies for amendment to gut the First Amendment.

Former professor calls for early indoctrination on climate change

On stage at Harry Reid’s National Clean Energy Summit at the Mandalay Bay Thursday was a parade of Democratic politicians touting planet saving platitudes and assorted palliatives.

Nevada Congresswoman Dina Titus pulled out and dusted off one of Obama’s favorite putdowns for those global warming skeptics, calling them members of the Flat Earth Society.

Dina Titus at clean energy confab. (Getty Images)

“Ignoring these kinds of issues of climate change while also disregarding the economic benefits that individuals and companies can have by reducing their energy use and conserve resources is just an irresponsible response to a serious problem,” she declared in her thick Georgia drawl, though she has lived in Nevada most of her life. “Instead, I believe Congress should be going in the opposite direction. We should be moving aggressively to provide loan guarantees for clean energy development, to extend those tax credits …” At this point she was interrupted by applause.

She also was greeted with applause when she mentioned her support for proposed EPA to cut power plant carbon output by 30 percent, though she did not deign to mention it will cost the economy $270 billion a year, eliminate the equivalent of 2.9 million jobs a year through 2040 and increase the price of residential electricity by 15 percent.

Titus went on to call for educating people about the threat of climate change. “Educating people is very important. We should educate them beginning at a very early age in kindergarten,” said the former UNLV professor.

Education or indoctrination?



‘Free candy for boys named David’

For years the editor of the opinion pages at the Las Vegas Review-Journal, John Kerr, kept a hand-written letter tacked over his desk. If I recall correctly the heading on it was: “Free candy for boys named David,” signed by David. It was a daily reminder of the self-centered avarice of children and politicians.

It could just as easily have read: “No taxes for companies named Tesla,” signed by Gov. Brian Sandoval.

According to the R-J’s calculations, the tax breaks and tax credits total $1.3 billion for Tesla’s $5 billion battery plant to be built in Storey County. It is to build lithium-ion batteries for Tesla’s electric cars at such a volume that the cars supposedly will be cheap enough for ordinary people to afford them. The Legislature is expected to roll over like a love sick puppy next week and then wipe their paws on the part of the Nevada Constitution that dictates “uniform and equal rate of assessment and taxation.”

The numbers are eye-popping.

But the number that caught my eye was way in the story:

“Tesla would commit $7.5 million a year for five years to the state public education system as a way to help offset the impact of the workers on the local school districts.”

Well, at least they are going cover the cost of educating the children of those 6,500 factory workers they say they will hire. Right? Even if each worker had only one child in public schools, the average cost per child for operating and capital outlays is $10,000 each per year.

That’s $65 million a year.

Where does one go to apply for tax-free status for 20 years?

Gov. Sandoval speaks while Musk (left) listens. (AP photo via R-J)



Newspaper column: How can Nevada provide justice for rural indigents?

A commission set up by Nevada’s Supreme Court has found that in rural counties the system for providing attorneys for poor people accused of crimes is broken and is in desperate need of fixing.

The Indigent Defense Commission is expected to present its findings to the Supreme Court in December, at which time the court may ask the 2015 Legislature to create and fund a system of public defense attorneys for all counties other than the more densely populated Clark and Washoe counties, as reported in this week’s newspaper column available online at The Ely Times, the Elko Daily Free Press or the Mesquite Local News.

The commission hired the Massachusetts-based Sixth Amendment Center to prepare a 44-page report on the history of indigent defense in Nevada, the current state of affairs and recommendations for improvements.

The Sixth Amendment of the Bill of Rights guarantees: “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury … and to have the assistance of counsel for his defense.”reclaimingjusticejpg

Nevada’s 1864 Constitution also provides that “in any court whatever, the party accused shall be allowed to appear and defend in person and with counsel” and that he may not be deprived of “life, liberty, or property, without due process.”

Until 1963, the right to counsel was widely interpreted as permissive, meaning a defendant could hire an attorney if he could afford one, but in the case of Gideon v. Wainwright the U.S. Supreme Court mandated that states — not counties or local jurisdictions — must assure competent counsel to poor people accused of felonies.

But unlike other states, Nevada was one of the first to pass a law requiring that the poor be provided paid lawyers. The 1877 law said an appointed attorney was entitled to receive from the county treasury “such fee as the Court may fix, not to exceed fifty dollars.”

The Sixth Amendment Center report — published a year ago under the title “Reclaiming Justice” — concluded that the Gideon decision meant “that the right to a lawyer means more than just the right to a warm body with a bar card.”

According to the American Bar Association standards, no attorney, no matter how experienced, should handle more than 150 felonies in a year, but caseloads in Nevada far exceed that.

The center’s report argues that rural counties simply are not financially capable of providing the kind of effective defense counsel that is necessary and there should be a state-funded public defender office that could cover all of the rural counties.

Read the entire column at Ely, Elko or Mesquite.