The tax incentive package assembled by Gov. Brian Sandoval to woo Tesla’s “Gigafactory” battery plant is unprecedented in size and scope for the state of Nevada and is one of the largest in the country.
The overall value to Tesla is estimated to be $1.25 billion over 20 years—a figure that is more than double the $500 million package CEO Elon Musk said would be required to draw the company.
If the deal is approved by the Nevada Legislature, Tesla will operate in the state essentially tax free for 10 years.
In exchange, the company must invest a minimum of $3.5 billion in manufacturing equipment and real property in the state—a threshold that is much lower than the $10 billion state officials say they expect the company to invest in Nevada over the next two decades.
This is a big financial deal, one that Nevada apparently doesn’t want to let get away. If approved, this would be the tenth largest tax break offered by a state to a corporation:
If approved by the Legislature, the tax incentive package would be the 10th largest in the country, according to data compiled by Good Jobs First, a labor-backed non-profit that analyzes tax incentives. Here are the current top 10 tax incentive deals in the country:
- Washington: Boeing, $8.7 billion
- New York: Alcoa, $5.6 billion
- Washington: Boeing, $3.2 billion
- Oregon: Nike, $2 billion
- New Mexico: Intel, $2 billion
- Louisiana: Cheniere Energy, $1.7 billion
- Pennsylvania: Royal Dutch Shell, $1.65 billion
- Missouri: Cerner Corp., $1.64 billion
- Mississippi: Nissan, $1.25 billion
It would be interesting to know a few things:
1. What happens if Tesla does not provide the jobs or the value projected? Does their tax break adjust downward accordingly?
2. Who is Nevada competing against and what are their offers? With such high stakes, it wouldn’t be unheard of for a party to overbid against themselves.
3. What do Nevada residents think of this? Tesla could lead to jobs and tax revenues a decade down the road but this is a lot of potential revenue that a corporation will benefit from.
With this kind of money being thrown around (or at least theoretically available), don’t most municipalities and states have to play this game in order to attract businesses? And in the long run, who can keep up with this competition?