Nevada is about to pass the biggest corporate tax giveaway in its history

By Reid Wilson, Sept. 10, 2014

Nevada state legislators will meet Wednesday in Carson City to consider a package of incentives and credits that will lure one of the biggest economic prizes to an area in serious need of new manufacturing jobs — though at the cost to the state of more than $1 billion.

That’s the price of property and sales tax breaks it took to convince Tesla, the electric car manufacturer, to build a $5 billion lithium battery factory in northern Nevada. The package of incentives is the single largest giveaway to any corporation in the history of Nevada.

Gov. Brian Sandoval (R), whose office negotiated the deal, waited until late Tuesday night to call the legislature into session on Wednesday. Legislators stayed up late reading details of the bill, and top Sandoval aides met with Democratic and Republican lawmakers to outline the scope of the legislation.

In a fact sheet [pdf] released last week, the Governor’s Office of Economic Development said Tesla would not pay Nevada sales taxes for the next 20 years, and would avoid property and business taxes until 2024. The proposal even gives Tesla a break on property taxes paid on equipment for the next decade.

The company also gets a $12,500 tax credit for every permanent full-time job that pays at least $22 an hour, up to 6,000 jobs. The so-called Gigafactory is expected to directly employ about 6,500 high-tech manufacturing workers by 2018, when the $1 billion facility is complete.

The total package amounts to about $1.3 billion. Economic development officials in Sandoval’s office estimated the project could ultimately yield $1.95 billion [pdf] in direct or indirect revenues over 20 years. Along with the 6,500 jobs at the factory, the growth in and around the Storey County facility would create another 16,000 jobs.

That would be a big boost to Storey County, the tiny rural area east of Reno and Carson City where the Gigafactory will be built. With just 3,900 residents and an unemployment rate of 7.2 percent as of June, the jobs Tesla says it will bring are expected to change the face of Northern Nevada, which has been slower to rebound from the recession than the southern part of the state.

Not every researcher is convinced that the Gigafactory would create so many jobs. New York University Professor Richard Florida wrote Monday that the tax incentives would cost Nevada at least $56,000 per job, and perhaps as much as $132,000 per job, if the factory doesn’t create the number of indirect positions as the state expects. Florida cited other experts who expect the plant to create just 3,000 jobs, less than half what the company projects.

The billion-dollar incentive package will rank as one of the highest ever offered by a state to land a company. Since the turn of the century, states like Washington, New York, Oregon and New Mexico have all passed billion-dollar tax break packages aimed at keeping companies like Boeing, Alcoa, Nike and Intel in their states.

Good Jobs First, a group that monitors mega tax deals, says [pdf] states have offered 240 packages worth more than $75 million since 1976. Prior to the Tesla deal, the largest tax break Nevada ever offered was a 2012 deal worth $89 million aimed at keeping an Apple data center and server farm in the state.

The special session called by Sandoval isn’t strictly limited to the Tesla facility, and other industries were lining up to take advantage. More than 30 lobbyists have already registered with state officials to press legislators during what is expected to be a brief session, the Las Vegas Sun reported.

Correction: An earlier version of this article incorrectly characterized some tax breaks. The personal property tax breaks apply to equipment.

 

Reid Wilson covers national politics and Congress for The Washington Post. He is the author of Read In, The Post’s morning tip sheet on politics.