Hacker News Reader

Comment by cmahler7 | Hacker News Reader

This is pretty standard for deals like this, Nevada gave Tesla 1.3 billion for the Gigafactory. This "could" draw 3 billion. It's just tax incentives, not like it's a cash payment. But anything to make Trump look bad I guess.

View on HN

There is essentially no difference between giving a company money and not collecting money from them that they would otherwise pay. Economists call these sorts of things tax expenditures. It amounts to taking money from some people and companies who pay their full tax bill, and giving it to others who don't.

Most of the "incentive" situations are not a choice between those two scenarios, they are a choice between having the business there and giving them an (initial) tax break, or having the business go elsewhere. It's a choice between collecting discounted taxes, or none at all, not discounted vs. non-discounted.

Except that it doesn't work like that.

What happens is that the jobs up and move as soon as the subsidy ends.

There has been quite a bit of research done on these kinds of tax subsidies and they almost always cost more than doing nothing and not getting the jobs.

So you claim that in five years Tesla will abandon their Nevada Gigafactory and build a new one in another state. Doesn't check out.

It's a typical prisoners' dilemma failure. The states ought to band together and pledge not to give out these tax breaks. Since they're all deciding independently, the incentive to defect and offer a tax break is high.

There's an enormous difference. They wouldn't otherwise pay it because their factory and jobs wouldn't otherwise exist.

But you could give the money to a company that already has a plant to develop new jobs. They don't because its untenable to see the government just write a big check to a private company.

Its a fictional difference that is used to make it seem more palatable.

You're discounting the other uses that money could have had if it wasn't taken from taxpayers and given to the favoured company. How many small businesses were pushed over the margin by the taxes that were necessary to raise enough money to give benefits to a foreign corporation? How many companies had to lay off a few employees?

Governments don't have a great track record of picking winners, and companies that are capable of stealing headlines don't necessarily have a bigger or better impact than thousands of unknown businesses.

There is an essential difference between being bled less (which is what these tax breaks appear to be) versus receiving a blood transfusion.

This should be the top comment. I was checking the post on the white house facebook page (https://www.facebook.com/WhiteHouse/posts/1385876754833387) and everyone is so skeptical. 10 billion investment + 13k people employed + discounted taxes - the sum total is a net positive for Wisconsin and a good deal.

Reply on news.ycombinator.com