Travis County, Texas, which includes the city of Austin, approved a tax incentive deal for the electric automaker Tesla to open up a new production facility in their county.
This deal amounts to a $14.7 million tax break over a period of ten years if certain milestones are reached. These milestones? Well, the company, led by Elon Musk, must invest $1.1 Billion in the new facility within five years. Once they reach that, the county will issue a tax rebate of 70%. Once that benchmark is reached, there will be an increase to 75% moving forward. As added incentive, this tax deduction increases to 80% once $2 billion in investments is reached.
News of this incentive on the part of the Texas County helped to push Tesla stock higher by 3.5%. This coming after an already stellar year in the stock market that made the electric automaker the most valuable in the world.
While local governments are usually happy to welcome new businesses into their community, Travis County may have had a little extra incentive to offer these tax breaks at this time. Due to the pandemic and the nationwide economic disaster caused by it, the unemployment rate of that county currently sits at 12% compared to just 2.2% just a year ago.
A full-scale auto manufacturing facility would go a long way toward reversing that. Tesla estimates that 5000 people will be employed by the facility by the time its ready to go. These workers will be low skilled and receive an estimated salary of more than $40,000 a year.
Not only is Travis County, TX offering an incentive, but Tulsa, OK is being considered for this new facility and has offered its own incentive package as well.
There are a few things to note in this story. First, local taxes can indeed be a contributing factor when it comes to businesses deciding where to set up shop. This is especially true when it comes to larger national or international corporations.
For these companies, the first thing they look at with every decision every day is the bottom line. While many may attribute this to greed, the fact is the decision makers are not acting on their own behalf in these multi-billion-dollar companies, they’re acting on behalf of shareholders. And in today’s economy, shareholders are not just a bunch of other rich guys. The majority of them are average Joes like you and me. In many cases, these investments are what these average Joes are relying on for their retirement. So, when it comes time to decide where to open up the newest facility, a region that takes a 15% cut out of the bottom line is much more attractive than a region that takes a 30% cut.
Many in our country have lost sight of this. I’m reminded of the recent decision in Seattle to lay new taxes on Amazon. Or the situation in New York not to long ago when Amazon wanted to open a new facility there but ended up being chased out of town by those who were opposed to the tax incentives the city offered. While these taxes aren’t the only factor companies consider, and while other factors can make up for higher tax rates, they are a consideration and can be a big consideration under the right circumstances. It would be good for citizens to remember this when they vote for city or county officials who may be in the place of offering these incentives. These decisions can be the deciding factor in new, good paying jobs coming into an area.
Finally, as the world’s most valuable automaker, Tesla continues to expand its operations right here in the good old U.S. of A. America’s distinction as the worlds leader in car manufacturing has long been in question. Our largest automaker, G.M. has been eclipsed by foreign competitors such as Toyota and Volkswagen. Even our traditional car manufacturers have offshored much of their operations to other countries. Yet Tesla continues to buck that trend and open up facilities in America and employ American workers. As the company continues to grow and innovate in the electric vehicle industry, the crown of leading the world in auto manufacturing may very well return to America.
However, you look at it, the future of Tesla looks a little brighter today. And the future of Travis County, Texas can look a little bright as well.