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mack_turtle

Tesla in Austin

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Posted (edited)

word is that Tesla is going to build a factory east of Austin. the proposed site is just outside of 130 between 969 and Hwy 71. My brother is considering moving his family of five from Ohio to here if I could get a job there (he's some sort of manufacturing engineer).

explain it to me like I'm five: why do cities and counties offer incentives to corporations to move here? shouldn't those corporations be paying US for the privilege of operating in our region, with access to our infrastructure (if you can call it that) and our workforce?

 

Edited by mack_turtle

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Have you been to the run-down cities or towns in the northeast?  Of course not, why would you? Shitholes, some might call them. Those cities did a poor job of develping and bringing in new employment opportunities. Texas isn't making that mistake. 

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Posted (edited)

I attended Ball State University in Muncie, Indiana. yeah, that place looks rough. obviously industry left that place high and dry. still, it feels like we taxpayers are on the hook for a company to make billions of dollars. I see how we'd want to create incentives, but it sounds like we're basically paying them to make money here. something seems off about the degree to which we're willing to lick boots of an industry. Amazon or Tesla looks our way and we can't drop out pants and bend over fast enough for them.

Edited by mack_turtle

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It is a double edged sword.

The theory is that if Tesla moves its factory here that it will draw other suppliers and ecosystem partners here. The big factory is the loss leader and all of the supporting businesses overcompensate for those incentives.

However, in practice, few are able to actually connect the dots after the fact. All of these cities are bidding to get the business so they have to offer something up. No difference than with sports teams. This is like convincing your wife that you need to spend $7000 on a new bike and that will give you better mental health. You see the $7K go out the door, but it is hard to quantify the benefits.

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I've never agreed with the theory.

I get the sports team thing. The city is paying to have an amenity. It's like paying to build a Zilker Park. A sports team is a unique thing that thousands of people will enjoy. But I've always contended that the free market would prevail over a government entity stepping in. A team owner is going to have to find somewhere to put his team. If no city paid him to come he would eventually go somewhere on his own dime.

The tax breaks for industry and business are given to bring economic activity and jobs. But they also bring more people that the city ends up footing the bill for more schools, roads, police, and other services to handle the increased population while actually bringing in less taxes because that plot of land is now off the tax rolls for years. 

There was a stink about the tax deal The Domain is getting. Again, that retail developer is going to build somewhere regardless of tax breaks. I said at the time there's no difference in the city helping build that big commercial space as it would be to give a bunch of small businesses tax breaks. Those supposedly desirable highly skilled workers that come with these kind of deals are not moving to Austin to work at Dick's Sporting Goods. 

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I moved to Austin and I still pay taxes. you'd think I should be paid to live here, considering how much awesomer the city has been now that I arrived. Where's my tax incentive?

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It  seems to work like this in today's economy: Privatize profit and socialize loss.

I certainly would like to see the actual ROI on these subsidies.  Any reasonable person should question the logic of throwing large sums of taxpayer dollars to bribe multi-billion industries to come here or expand their footprint. They're coming to places like Austin because thats where the talent is. Prior to this, I lived in a state that had nothing but brain-drain to offer and businesses we fleeing no matter how many bribes were offered. 

Take care of your people, grow the talent and infrastructure, and they will come.

 

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I believe that that traditional wisdom behind providing tax breaks to companies to locate to your area works like this:

1. Company locates to your area but they aren't paying any taxes because you gave them a big package.

2. Every job that company creates brings in a worker who DOES pay taxes.

3. That worker brings in their family who also pays taxes.

The math should work out that the region makes more money than they spent.  The reality is that you can't really measure it and the politicians that made the decisions don't expect to be in power by the time it could be measured anyway.  

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3 minutes ago, Tree Magnet said:

 the politicians that made the decisions don't expect to be in power by the time it could be measured anyway.  

And they've already lined their pockets on our dime.

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I used to have a dog named Tesla. She was a good dog, but she got no tax breaks when we moved to Austin. 

 

FAC4BCA6-6ED4-4079-AAE3-F1D45523B894.jpeg

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2 hours ago, The Tip said:

I've never agreed with the theory.

 

The theory is sound, it's how it plays out in practice that is what you don't like. 

I'm not a fan of giving incentives either, but having come from Chicago, a place where businesses leave, the cost of not attracting new businesses is quite painful. It's one thing to say you have to pay higher taxes because some company came in and got an incentive. It's another to say you have to pay higher taxes because a company left (or went under).

If I have to pay taxes to cover one of those two situations I'd far prefer the former over the latter. 

The reality is that any growing, healthy city is a better place to live in. And here's the complete list of all the cities that are growing and attacking business yet offering zero incentives:

 

Basically it is the cost of progress. I'm sure my dad is happy that he is not paying taxes to support these companies. Also, the house I sold in Chicago for $149K almost 30 years ago now probably sells for around $250K. The money that I parlayed in that sale has gone up a minimum of 4X from when I bought here. There is an implicit price and you can't look at this stuff in a vacuum.

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Always be skeptical. The bottom line is you are screwed either way.

When people talk about how "it didn't used to be like this" they are not complaining about how things are, they are complaining about how visible things are. We have way more transparency into the inner workings of government, business, etc. than ever before.

Shit hasn't changed. What we know about it has changed.

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Posted (edited)
33 minutes ago, AustinBike said:

Always be skeptical. The bottom line is you are screwed either way.

When people talk about how "it didn't used to be like this" they are not complaining about how things are, they are complaining about how visible things are. We have way more transparency into the inner workings of government, business, etc. than ever before.

Shit hasn't changed. What we know about it has changed.

Be skeptical for sure. You have to ask who this benefits. The many or the few, and at what cost? 

It has always been there, but has gotten more blatant and we've become more cynical. The corrupt doesn't bother to hide their misdeeds because they will pay little if any consequence for them.

Edited by ATXZJ

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Been in manufacturing my whole adult life. My specific engineering technician skills and knowledge won't apply, but all the general knowledge should. I might consider applying there, when they start building out. 

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Posted (edited)
On 6/23/2020 at 10:06 AM, mack_turtle said:

word is that Tesla is going to build a factory east of Austin. the proposed site is just outside of 130 between 969 and Hwy 71. My brother is considering moving his family of five from Ohio to here if I could get a job there (he's some sort of manufacturing engineer).

explain it to me like I'm five: why do cities and counties offer incentives to corporations to move here? shouldn't those corporations be paying US for the privilege of operating in our region, with access to our infrastructure (if you can call it that) and our workforce?

 

Let's say Company A wants to bring 1000 high paying jobs to a city. The will offer a tax break to the corporation because the income from those 1000 highly paid folks(and their families) will contribute more to the local economy than the loss of corporate tax revenue. In addition it will attract other places that want to be associated with these corporations(e.g. Amazon or Tesla). These companies make the city more attractive as a whole and improves it.

There are downsides of course(there always are) but this is one area where I'm okay with giving the tax breaks. Usually, there is a stipulation where the amount of tax breaks is directly related to the number of jobs and the pay level of those jobs. I used to work at Schwab and that was the case when the moved 900 jobs to Austin from San Francisco. The city gave a tax break but Schwab was required to create a certain number of jobs at a certain pay level.

That's the idea behind it and I'm 100% happy with giving corporate tax breaks with stipulations for job creation and pay levels. 

Edited by quixoft

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that's the idea. makes sense. the question is: how much is fair and when is the company taking advantage (and being given that advantage by elected officials)?

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Posted (edited)
3 minutes ago, mack_turtle said:

that's the idea. makes sense. the question is: how much is fair and when is the company taking advantage (and being given that advantage by elected officials)?

There is definitely a gray area there and room for corruption. That's where local voters come in and kick out the offenders if it happens. I would love to boot out mayor Adler and the entire Austin City Council but I live in Round Rock now. 🙂

Edited by quixoft

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8 hours ago, quixoft said:

That's the idea behind it and I'm 100% happy with giving corporate tax breaks with stipulations for job creation and pay levels. 

I'm behind it as well, but only if there is transparency and auditability. Just look at what happened with Foxconn in Wisconsin:

https://www.theverge.com/2020/4/12/21217060/foxconn-wisconsin-innovation-centers-empty-buildings

I've been in their facilities in Shenzhen and Taiwan (Hon Hai) and they were pretty impressive, they're a machine. The fact that this thing fell apart tells me that this was not about manufacturing but about capturing incentives.

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Ohio is currently suing GM to the tune of $60M due to the closure of the Lordstown plant.   They had several incentives/agreements, some going to 2028 and some going to the 2040's.  It will be interesting how that unfolds.  Not enough of this happens.

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