Margins tax could scare off potential job creators, like Tesla Motors

Tesla Motors has now confirmed it has broken ground on land outside Reno for a potential site for a $5 billion lithium-ion battery factory that would employ as many as 6,500 workers.

According to a Las Vegas news account, in a letter to shareholders, Tesla CEO Elon Musk said the site several miles east of the Reno-Sparks area “could potentially be” the location for the so-called gigafactory. “Consistent with out strategy to identify and break ground on multiple sites, we continue to evaluate other locations in Arizona, California, New Mexico, and Texas,” Musk wrote.

Tesla is partnering with Japanese electronics company Panasonic to build a 10 million-square-foot battery factory. The intent is to cut the cost of batteries for its new Model 3 electric automobile by 30 percent so the car can retail with a price of $30,000, instead of the $70,000 starting price of its current sports car line.

Lance Gilman, principal and director of the Reno Tahoe Industrial Center, later told The Associated Press the bidding war with Texas, California, New Mexico and Arizona has just begun.

If you talk about a horse race, no one else I know of has even left the starting gate,” Gilman told AP. “You are looking at a piece of property that is ready to go tomorrow.”

The 167-square-mile site is just 200 miles from Tesla’s Palo Alto, Calif., headquarters. Nevada also has the nation’s only lithium mine, which would cut the cost of transportation. A Union Pacific railroad track is near the site. The area has plenty of solar and geothermal power resources, which is attractive to Musk, a big backer of renewable energy. (Pay no attention to the fact lithium-ion batteries have a tendency to catch fire.)

Gov. Brian Sandoval and local mayors would not discuss with reporters any potential incentives being offered to Tesla to sweeten the deal.

But just days before this announcement, the Reno newspaper reported that work at the industrial park site has stopped, and this was confirmed by a developer of the site.

This is August.

What possibly could Tesla officials be waiting on?

November perhaps?

That’s when Nevadans will decide whether to impose a 2 percent margins tax on all businesses grossing more than a million dollars a year. The money — an estimated $800 million a year — supposedly would fund education. The tax would give Nevada an effective corporate income tax rate on profits of 15 percent — the highest in the West and nearly double California’s business tax rate of 8.8 percent.

Might be hard to cut the cost of your batteries by 30 percent while paying a corporate income tax of 15 percent.

The most recent study of the tax’s impact for Nevada Policy Research Institute by Beacon Hill Institute at Suffolk University said it would destroy 3,600 full-time-equivalent private sector jobs. If the Legislature spends the money as intended, but there is no requirement that they do so, the margins tax might add about 2,000 public sector jobs in education.

That is still a net loss of 1,600 jobs, reduction in real disposable income by $240 million annually and a decrease in investment by $7.1 million annually.

But that doesn’t address the tax’s impact on potential economic and job growth. Anyone care to add in the jobs that will not come to Nevada as result of such a tax? Perhaps we should start the count at 6,500 and see where it goes from there.

We urge the voters to keep these numbers in mind come November. — TM

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