The legislature’s 1st job should be stopping a 2nd Tesla giveaway
As the Nevada Current reported earlier this week, in a month, on March 2, a state economic development agency is scheduled to vote on giving Tesla new, additional tax breaks.
Under Nevada economic development law, the agency may have no choice but to approve the “abatements.”
And then a state where education, health, transit and multiple other public programs and services are historically among the nation’s least adequately funded will end up effectively giving hundreds of millions of dollars to a company helmed by the world’s second richest human.
It’s absurd on its face.
It would also be, to borrow a phrase Nevada’s governor has been trying to popularize, “the Nevada way.”
Tesla is eligible for the tax “abatements” under the original 2014 legislation that authorized up to $1.3 billion in tax breaks and other publicly financed support for Tesla’s battery factory. Although it was written specifically for Tesla, the word “Tesla” is nowhere in the law.
Instead, the law authorizes abatements for any applicant that makes “a total new capital investment of at least $3.5 billion in this State within the 10-year period immediately following approval” of the tax breaks by the Governor’s Office of Economic Development (GOED).
Tesla announced last week it was expanding operations at the site of its battery factory in Storey County. The estimated investment: $3.6 billion. Convenient, no?
In 2014, Nevada lawmakers unanimously rammed their original generosity to Tesla into law during a rushed two-day special legislative session. It’s hard to know how many if any of them had time to envision Tesla taking a second massive bite at the same apple nine years later. Maybe Elon Musk and other Tesla officials weren’t envisioning that either back in 2014.
But Musk and his company are envisioning it now, and asking for a new round of tax breaks.
Perhaps there will be some surprise, some last-minute consideration – or merely a sense of decency – that will prompt GOED to postpone granting Tesla the tax breaks on March 2.
Or perhaps GOED will treat the giveaway the same way (the Nevada way) lawmakers did in 2014, and rubber stamp it with nary a thought.
The latter seems by far most likely. That means the only way a relatively small state can avoid giving a needless but expensive handout to the 7th most valuable company in the world will be through legislative action. And fast.
Add a zero, or something
Nevada’s State Legislature only meets every other year. Fortunately, this is one of those years. The legislature convenes Monday, in fact.
Lawmakers should spend a respectful amount of time – two days sounds about right – amending the 2014 law in a way that would scuttle Tesla’s application. (One idea: Add a zero or two, or three, to the law’s $3.5 billion investment threshold.)
They would have to pass it quickly, as an emergency measure. Nevada legislators did that in 2013 to speed through an online gambling bill at the resort industry’s request, so the procedure isn’t unprecedented.
The bill would then go to the governor, who can sign it, veto it, or do nothing. If he does nothing, after five days it becomes law.
If he vetoed the bill, It would take a two-thirds vote in both houses to override the veto. Democrats have a veto-proof majority in the assembly and are only one vote shy of it in the senate. But it might not be that close. It can sometimes be surprising how many Republicans don’t like government giveaways to specific corporations when directly confronted with them.
Perhaps if GOED saw legislators were acting, it would hold off, giving lawmakers more time to complete the process. But to be on the safe side, the legislature would want to have the new law on the books and in effect before GOED could wield a rubber stamp on March 2.
And under any scenario by which the legislature halted Tesla’s second giveaway, Tesla might sue.
So what? Nevada would have nothing to lose that it wasn’t going to lose anyway. And a Tesla suit might signal the start of things getting pretty interesting, in a nice way.
Wanted: A new Nevada way
Nevada awarded Tesla the original giveaway deal as part of what economic development critics call a “race to the bottom.” Beaten into submission by corporations, state and local governments nationwide routinely compete with each other to see which will give some corporation the most cash and prizes in exchange for the company doing some project or other in their state.
Just as routinely, state and local officials defend giveaway packages by saying everybody does it so they have to do it too.
The competition between governments has also been described as a zero sum game. A corporation is going to put its project somewhere, after all – the overall number of jobs added to the nation’s economy will be the same whether a project is located in Nevada or New Mexico.
But in the process, Nevada, New Mexico or wherever else “wins” the race to the bottom ends up losing tax revenue and its ability to provide public services and infrastructure – services and infrastructure that usually are put under even more stress by the arrival of the new project.
In the spring of 2014 Musk said five states were being considered for the battery factory – Nevada, Arizona, California, Texas, and New Mexico. (We will probably never know if he was telling the truth; A dirty little secret among the economic development crowd is that there is rarely if ever any way of knowing if incentive packages actually matter, or companies have already picked the location they want but just pretend to be looking elsewhere to make the already-selected location craft generous monetary benefits for the company.)
When Musk announced his battery factory sweepstakes, the governors of those states should have responded jointly, noting each of their states offer attractive advantages for business and industry and would be happy to welcome Tesla, but announcing that they were not willing to sacrifice public services and obligations by participating in a high-stakes race to the bottom with Musk holding the checkered flag. Or words to that effect.
Instead, and unfortunately, they cow-towed to Musk.
If the Nevada State Legislature proactively thwarts Tesla’s new application for more tax breaks, and Tesla sues, the ensuing battle would provide that commodity that at least some Nevadans seem to crave: national attention. But much more importantly, it would bring national attention to the dismal practice of quasi-governmental economic development officials nationwide facilitating a corporate racket that rips off states and their citizenry while adding nothing to the national economy that wouldn’t have been added anyway.
If Nevada prevails in such a suit, great.
If Tesla, a corporate titan led by a buffoonish media personality, were to prevail over Nevada, a small state, the example would serve as a poster child for just how insidious, counterproductive, overbearing and aggressive corporations can be once they get their snouts in the public trough.
And instead of suing, if Tesla announced that because Nevada had refused to provide hundreds of millions of dollars of new, additional tax breaks, it was going to take its expansion plans to one of its other factory locations, it would demonstrate how petty and punitive corporations can be when a state has the impudence to stand up to them.
Meanwhile, if Tesla refrained from suing, took its medicine, and proceeded with its Nevada expansion for all the fundamental reasons that led it to make its announcement last week (reasons that surely are far more economically consequential than Nevada’s cheesy tax breaks), then a state that can’t afford it won’t be needlessly yet obscenely lavishing corporate welfare on a company that doesn’t need it.
To borrow a phrase popular among the aforementioned economic development subculture, it’s a win-win.
And whatever the outcome, the Nevada State Legislature has an obligation to the state, its people, and common sense to do whatever it can to shut down a second Tesla giveaway.