[anigbrowl]

Everyone knows that's the idea. But $1.2 billion is a lot of money. how long will it take to make this foregone revenue back in taxes? If there are 6000 employees, they're going to have generate $200,00 each plus interest in tax revenue before the state of Nevada breaks even. Nevada doesn't have a state income tax so it's going to have to get that money back through sales taxes, which means (assuming the top rate of 8.1% in the state) after each of the 6000 employees households has spent about $2.5 million within the state.

Don't hold your breath, in other words. Even with the most optimistic economic multipliers I don't see the state breaking even on this for about 25 years. I think they're gambling on the 'gigafactory' being the center of a manufacturing hub that attracts other businesses to the region, sorta like HP in Silicon Valley back in the day. Perhaps they'll call it 'Lithium Oasis' or something if it works out.

I'm neutral on this, and I hope it works out for them, but it's not the sure thing you suggest. Companies that get huge tax breaks sometimes crowd out other employers that were willing to do a better deal, only to up sticks and leave as soon as the tax break expires. I'm not saying Tesla will do this or that they shouldn't seek the best deal, just that it's not guaranteed to be a long-term benefit.

[GreenPlastic]

The state isn't writing Tesla a 1.2B check. It's not like the state is starting out in a -1.2B hole. They're starting from a slightly negative and almost 0 position (some amount of state resources went to negotiate the incentives). They have almost nothing to lose and everything to gain. It's a tax incentive which means in order for Tesla to benefit, they would have to have developed property to pay property taxes on (which is good for the state), and had net income to offset (which again is good for the state). In very rare scenarios, some of the states resources are used and Tesla pays 0. In most cases, the state can only win in a deal like this.

Not to mention, there are now 6500 new jobs, and 6500 additional middle-income wage earners paying taxes that the state never had to begin with.

[anigbrowl]

I know that, that's why I referred to it as 'foregone revenue' and talked about crowding out.

Not to mention, there are now 6500 new jobs, and 6500 additional middle-income wage earners paying taxes that the state never had to begin with.

Really? Everyone who goes to work there was previously unemployed? Economics is not so simple.

[Drakim]

But if they hadn't given any tax breaks at all, Tesla wouldn't have gone to Nevada. Which means that the full 'foregone revenue' was never an option on the table in the first place.

[anigbrowl]

Consider the middle ground. Tesla were looking for about $500m of incentives, and got a lot more than that. Now if the projections pan out it may work out very well for the state but it could end up as a white elephant, as these deals sometimes do. Also, consider that about 10% of this is coming out of reduced incentives for other industries, who will now presumably invest less in Nevada than before: http://www.rgj.com/story/news/2014/09/04/nevada-strikes-bill...

[pooper]

While I am immensely happy as a Tesla cheerleader of sorts, I am not entirely convinced that these deals are good either.