People are making a big deal about the latest Tesla deal to build a new gigafactory to build batteries for their electric cars. The factory will end up employing approximately 6,500 job, an absolutely huge number of jobs. But the problem is people are focusing on the wrong part of the deal and not looking at the elephant standing right in front of them.
Many people on the right are jumping at the opportunity to blame California’s high tax rates as the reason for Tesla picking Nevada over California. California, of course, has some of the highest income and business taxes in the country. Nevada on the other hand has no income tax and also has no corporate income tax. The comparison seems ripe for the picking, doesn’t it?
Well, not necessarily. Nevada made an unprecedented deal with Tesla to lure them into the state with $5 billion in tax incentives and other deals. This is the single largest tax incentive plan in the history of the state of Nevada. So the question that needs to be asked is if the high taxes of California are enough to drive businesses to other states like Nevada, then why did they give so many tax breaks to the company?
While it’s good to see good American manufacturing jobs being created again and it’s all the more better that it’s for electric car batteries, the government shouldn’t be cutting deals with corporations to do it. How many small mom and pop businesses out there could use a hand with their business right now, but have no such help from the government? Meanwhile, a gigantic company like Tesla is getting a multi-billion dollar tax break to locate a factory in the state.
A question that needs to be asked to any candidate is what roles to taxes play in economic development? Are higher taxes good or bad for job growth? Because both of the standard models that the left and right put forth more or less failed in this Tesla case. Tesla clearly chose the state with the lower taxes, i.e., Nevada both because of an overall lower tax rate and also massive tax incentives. This shows that the high tax rates in California seem to matter at least to some degree to the business, but at the same time, it obviously took the company much more than just the overall tax rate itself to locate in Nevada. If lower taxes alone were the determiner, then why wouldn’t they have chose Nevada over California regardless?
Getting a clear answer from politicians making these kinds of deals in government may be tough but it is absolutely essential when making an informed vote this election season. If it is the purpose of government to try and select large corporations to come in and make jobs for the citizens, what are we going to do for small business? Similarly, if governments aren’t going to do anything to bring in these businesses, what will they say to citizens when the companies choose states that will?