VW incentives

The total incentive package for the VW deal hasn’t even been calculated according to the Tennessee governor. However, they estimate it to be around $400 million in this article. But I think that number needs to be set in context.

*$81 million in free land from the County. That’s not cash out of pocket. That is land that previously wasn’t generating any tax for the county and now it will be.

*A state-offered job tax credit of $5,000 per job over 20 years is available on corporate taxes for companies investing at least $1 billion. It is valued at $100,000 a job over 20 years or $200 million for 2,000 employees. Again, no cash out of pocket. If TN didn’t attract the plant, they wouldn’t have received this tax anyway. Now they forgo the corporate taxes but get 10s of millions in personal taxes paid over the 20 years. Not a bad deal.

Again, not one dime of taxpayer dollar spent yet.

*Estimated job training provisions typically run between $60 million and $80 million. This is cash out of pocket. However, states spend billions each year on education and training so why not $60 million to train 2,000 workers on state-of-the-art manufacturing jobs that will last for decades?

I guess my point here is that the State didn’t just cut a cheque for $400 million and give it to the company. They are forgoing tax revenue they wouldn’t have anyway without the deal and they are giving away land that they weren’t generating taxes on anyway and they are paying to train workers.

Not a bad investment in my opinion.

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0 Responses to VW incentives

  1. mikel says:

    It depends on who you are whether its ‘bad’ or not.

    First, those numbers you gave make it pretty easy to ‘calculate the deal’. That the Governor is saying they haven’t yet calculated the deal means SOMETHING.

    Second, governments are very secretive, so we don’t really know ‘cash out of pocket’.

    However, the ‘hook’ isn’t at setup time. Take a look at what Irving has raked in for the Pulp mill over the decades its been there. From a corporate point of view, once you have the infrastructure set up-THEN you’ve got them by the cajones. It’s one thing to lose a deal at the outset, it’s quite another-as any NBer should know, when a big industry player packs it in somewhere down the line. NOTHING lasts forever.

    Third, in that book i read about corporate handouts an in depth study was made of a big corporate deal where the environmental, labour, and other costs were calculated and it was actually WORSE than had that company not shown up at all.

    That’s doesn’t mean its a bad deal or anything-we don’t know, probably never will. In ten years when VW sales go down because of cheap chinese imports and the government IS handing out ‘cash out of pocket’, we can have the debate again.

    But anybody with a mortgage can tell you the value of land. Economists only talk about ‘opportunity cost’ when land is used for economic purposes. We can compare that to Irving’s LNG terminal tax break. The argument was that since its not ‘cash out of pocket’ then its not really ‘costing anything’. And if it weren’t built at all, THEN it would have ‘cost’.

    However, an economy is an large and organic thing. BECAUSE of the tax deal NB lost the ability to auction off land to the highest bidder to OTHER gas developers, most of whom are desperate for anyplace crazy enough to put one in. Ironically, it also would have saved Passamaquoddy Bay-the deal in NB would have saved the gas company almost billions.

    Same in Tennessee, don’t mean to sound like NBT, but when you invite one company in like that it sets a precedent. If they can have free land, then why can’t I? Virtually every new company starts looking for the ‘best deal’. It’s not necessarily bad or good, it depends on the point of view.

    I wouldn’t fault BNB for not getting in on that. The mainstream auto sector isn’t going to come near the maritimes-transportation costs are too outragious and there is no local market. If there were more political pressure then there could be openings for small alternative vehicles, but Irving has such a stranglehold that you can even forget that too.

  2. Anonymous says:

    If TN didn’t attract the plant, they wouldn’t have received this tax anyway.

    I am not sure I like your comment above. What if that individual who works at the plant turned down a job at another place of work and now is left with an empty position…they would ahve received some un-subsidized tax revenue.