It's official. Tesla has broken ground at its new "gigafactory" near Reno, Nevada. While New Mexico appears to have missed out on Tesla and its expected 6,500 jobs, some legislators, when asked, seem willing to spend as much as 500 million tax dollars to lure the company to the state.
While details are by no means firm, it appears that Tesla is looking for an infusion of $500 million, not tax breaks of $500 million. The difference between the two is that tax breaks don't actually "cost" the state/taxpayers anything because Tesla would have to locate in New Mexico for any tax revenue to result from its activities. When it comes to outright spending of New Mexicans' tax dollars, those are dollars that come directly out of the pockets of average New Mexicans and the businesses already located here.
This important nuance explains why we at Rio Grande Foundation oppose payments made to the film industry which, according to a new legislative report, paid out $251 million in incentives to the film industry with $103.6 million in state and local tax dollars generated over the same basic time period. In simple mathematical terms, the state spent $147 million more than it generated from the film industry in recent years. That's called a "loss" in any other industry. Jobs were created, but the net loss really illustrates the inherent problems with the program.
The same reasoning explains why fiscal conservatives should not support outright spending of $500 million to bring in Tesla. Tax breaks are one thing, but if the company goes under, there are no "clawbacks" that will get $500 million in outright spending back.