Recently Faraday Future announced they will build a brand new, state-of-the-art automotive production plant in North Las Vegas. North Las Vegas has expansive development space, an available workforce, an encouraging tax environment and relative proximity to the Faraday Future headquarters in California. They will be located on the south end of the “electric highway,” a stretch of U.S. Route 95 between Reno and Las Vegas that has a large network of vehicle charging stations.
Faraday Future is investing $1 billion into the first phase of this 3 million square foot facility to be built in Clark County’s Apex Industrial Park. The plant will initially provide 4,500 professional and manufacturing jobs plus thousands more jobs will be created by local suppliers and independent enterprises to support the facility.
As usual, there has been controversy about whether state economic development efforts should include providing tax deferments. It is easy to see the arguments of those who say no to providing these incentives. What about businesses already here? Shouldn’t they be treated equally?
Some may be skeptical remembering the Fisker and Solyndra deals where the feds kicked in mega millions which were lost when they failed. In this case, Nevada is deferring taxes that would not be available if Faraday decided to build the plant elsewhere. If the project goes badly, Faraday loses their investment and Nevada ends up with a new, empty, state of the art manufacturing facility which will be attractive to another manufacturer to use at a greatly reduced price. The state loses nothing.
Providing tax incentives to companies wanting to relocate from another U.S. state is simply one state poaching another state’s jobs and doesn’t serve the national interest. However, in this case Faraday Future chose to locate a planned expansion in North Las Vegas. This is all new money. No existing jobs were lost and no tax base was reduced. So the incentives provided are a good investment for Nevada and the nation.
In fact, we should go much further. Let’s remove more tax burden from all domestic producers and shift those taxes directly to the consumer at the point of sale. After all, businesses don’t pay taxes – they merely collect them for government and pass them on to the consumer through higher priced products. Since the consumer pays all taxes, whether collected during manufacture or at the point of sale, the consumer remains whole no matter where the taxes are collected. The only losers, from a shift to consumption taxes, are foreign manufacturers.
Foreign manufacturers lose because the cost of operating in America is reduced, making the U.S. attractive for setting up more operations in America for their production needs.
The main winner from a shift in tax collection is American small businesses, every American wanting a job and our children and grandchildren. The American middle class would flourish once again and the American dream would be restored. Many Americans understand this even if the governing class doesn’t. This is why candidates in this year’s presidential election that advocate balancing trade and shifting some taxes to consumption (Trump, Sanders, Cruz) are exceeding expectations.
The problem in the last few decades is that China used protectionist practices to incentivize American corporations to fire their American workers up and down the supply chain and relocate production facilities from American soil to China and selling those products back to Americans. This is not how free trade is supposed to work.
President Reagan showed how free trade was supposed to work. It had to be fair as well as free. Trade had to have rules and everyone had to abide by those rules. To make his point when Japan began subsidizing their exports by devaluing the Yen, Reagan put a 40% tariff on motorcycles that were flooding the American market and warned Japan that autos would be next if they didn’t cease and desist.
Japan got the message and began building plants in America to sell to Americans using American land, buildings and American workers. Both countries benefit from this arrangement. Japan profits from these operations and Americans get thousands of jobs and small businesses to supply the Japanese operations. A classic win-win.
Let’s hope that China gets the message and stops poaching American jobs. Let’s hope they set up more plants in America to sell their products to the American market – the largest in the world. Let’s hope that American operations in foreign lands eventually sell to foreign markets. The Faraday Future plant in North Las Vegas is an example of how China should do trade with Americans. This could be part of a reformation of the U.S.-China trade relationship. Let’s hope a manufacturing renaissance is on the horizon for Nevada and America.
I know this is a lot of change to hope for but we have been waiting 8 years for the fulfillment of that promise.
Frank Shannon served in the U.S. Army, was an engineering/operations manager for AT&T for 27 years, was the owner of a small manufacturing business for 23 years, served as Colorado Chair of the Coalition for a Prosperous America and moved to Mesquite in 2013.