Newspaper column: Doling out tax favors doesn’t improve state’s economy

Largely overlooked at first during all the congratulatory back slapping — which came with the news that Tesla Motors had built an earthen pad in an industrial park east of Sparks for its new $5 billion lithium-ion battery “gigafactory” that would employ as many as 6,500 workers — was a statement by Tesla CEO Elon Musk about what he expects the state getting the plant to shell out.

Musk insisted that the company is still evaluating sites in Arizona, California, New Mexico and Texas, as well as Nevada, as reported in this week’s newspaper column, available online at The Ely Times, the Elko Daily Free Press and the Mesquite Local News.

In a telephone conference call on July 31 about company plans, Musk, 43, said of the $5 billion plant: “Of that number, we see Tesla probably providing 40 to 50 percent of the total; Panasonic probably about 30 to 40 percent; the state maybe 10 percent; and other industrial partners maybe 10 to 15 percent, depending on how vertical we go with the factory.”

That 10 percent from “the state” could be $500 million or more.

Security guards stop a car at the gate to the site Tahoe Reno Industrial Center east of Sparks, where Tesla Motors has built a pad that could be for a battery factory. (AP Photo)

But the name Elon Musk is known to make Nevada politicians swoon. Perhaps you recall how the Governor’s Office of Economic Development (GOED) this past year doled out $1.2 million of your money to another Musk-headed business. That tax money from a $10 million Catalyst Fund went to attract SolarCity to open an office in Las Vegas and create 100 jobs. SolarCity erects solar panels on rooftops, something nearly a dozen or so taxpaying Nevada companies already do.

GOED board member Secretary of State Ross Miller fawned, “You had me at Elon Musk,” while voting to award the handout, despite the fact Article 8, Section 9 of the Nevada Constitution states: “The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.”

That little Mexican hat dance on the state constitution prompted the legal arm of conservative think tank Nevada Policy Research Institute to file suit in state district court in Carson City.

The suit was filed by the Center for Justice and Constitutional Litigation.

As a part of its ongoing litigation in that case involving a Musk handout, CJCL retained an expert witness, Dr. Randall G. Holcombe, DeVoe Moore Professor of Economics at Florida State University.

In written testimony filed in the court case, Holcombe said, “Government subsidies to businesses are a drain on the economy, and do not provide any net benefit to the state or its citizens. If the business would be profitable without the subsidy, there is no public purpose served by paying it. If the business would not be profitable without the subsidy, then the subsidy supports a business that takes more out of the economy than it puts back in.”

Or perhaps the state could offer a tax abatement as it did with the Apple facility in Reno. Never mind that the state constitution also calls for a “uniform and equal rate of assessment and taxation,” well, except for mining.

Read the entire column at Ely, Elko or Mesquite.

7 comments on “Newspaper column: Doling out tax favors doesn’t improve state’s economy

  1. iShrug says:

    So the Catalyst Fund, which contained $10 million (now at most $8.8 million because of the $1.2 million gifted to Solar City and who knows what else) will magically increase to at least $500 million?

    I thought the $10 million also included the cost of administering the Catalyst Fund. I could be wrong, but it seems to me that a bigger Catalyst Fund would require a bigger bureaucracy to manage it. If the practice of giving handouts to new businesses is going to become “business as usual” in Nevada, wouldn’t an amendment to the Nevada Constitution be necessary?

    There is also the issue of discrimination against other businesses. We may be on the hook for the cost of litigation, when existing tax paying businesses get fed up.

  2. Winston Smith says:

    If you’re on the highway and a Tesla goes beep beep,
    Just move aside or you might end up in a heap.
    With fascism, Tesla runs Nevada roads all day.
    Public money helps power Tesla in every way.

    Fascism, the state’s financing you.
    Fascism, the competition is through.
    Fascism, less state taxes for you.
    Fascism, the competition is through.

    Nevada state’s really a crazy clown,
    When will it learn to not favor Elon?
    Yeah, a little fascism is great for me.
    Just ask Hitler and Mussolini.

    Fascism, the state’s financing you.
    Fascism, the competition is through.
    Fascism, less state taxes for you.
    Fascism, the competition is through.

  3. Rincon says:

    Shouldn’t there be a lawsuit?

  4. Steve says:

    You wanna file it, Rincon?

    I come down on the side of the tech in this…biased in favor.

  5. There is a lawsit over SolarCity, but nothing has happened with Tesla.

  6. iShrug says:

    Winston, your ditty is catchy!

  7. […] never mind that the state constitution also calls for a “uniform and equal rate of assessment and […]

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