As you likely heard, Tesla will be building its new “Gigafactory” at a site in Storey County near Reno in northern Nevada. What attracted Tesla to Reno? About $1.25 billion.
Tesla get a 100% sales tax abatement for 20 years (worth $725 million), a 10-year property tax abatement (worth $332 million), $75 million of transferable job credits ($12,500 on the first 6,000 jobs), a 10-year 100% abatement of Nevada’s modified business tax, $8 million of discounts on electricity, and $120 million of transferable tax credits. (The transferable tax credits can be sold by Tesla to other Nevada businesses.) Tesla is required to invest $3.5 billion in manufacturing and real property according to the Reno Gazette Journal.
While Tesla is a clear winner, and assuming that the economic development forecast comes true (a $100 billion economic impact over 20 years) so are Reno, Storey County, and Nevada, there are definite losers. Some of the Tesla tax breaks will be funded by eliminating other tax breaks:
- Insurance companies headquartered in Nevada will lose a tax break worth $25 million a year;
- The Nevada film credit is being cut from $80 million to $10 million; and
- The Tesla deal includes an express provision allowing Tesla to sell cars directly to consumers, bypassing automobile dealers.
The package, which Jon Ralston reported will be in five separate pieces of legislation, does have to pass the Nevada legislature. Governor Sandoval will be calling a special session of the legislature to start next Wednesday.
In the end, one must ask if the tax hit to Nevada is worth it. Of course, all those jobs are dangling like money to my state’s elected officials. One thing is quite certain: taxes matter, as always.