Earlier this month, Carson City was in ecstasy... Or was Carson City on Ecstasy? We're still trying to figure that one out.
We're also still trying to figure out what we can actually expect of our state government's giant wet kiss to Tesla. Already, Northern Nevada "tourism executives are salivating" over magically full airplanes and wondrous conventions popping up all over Reno. And already, Southern Nevada must endure yet another round of navel gazing over "why we didn't get Tesla" and "what Reno got right that Las Vegas gets wrong".
But what if the navel gazing that's considered "analysis" today is wrong? What if it's not based on actual facts?
Last week, the Los Angeles Times' Chris Kirkham interviewed some actual economists who have done some real analysis on what Governor Brian Sandoval (R) and the Nevada Legislature gave Tesla. Here's some of what they had to say.
"To assume that the economic impact is $100 billion assumes that everybody who was ever going to work at that battery plant was unemployed," said Enrico Moretti, an economics professor at UC Berkeley.
Choosing a 20-year time frame to analyze also makes the projected economic effect look huge compared with any benefits given to Tesla. But that's misleading, said [David] Swenson, the Iowa state economist.
"It doesn't mean anything," he said. "Let's assume I made $50,000 over the last 20 years. Therefore, I'm a millionaire, right?" [...]
"They're treating all this revenue as if it's free profit that's just going to be sent back to everyone as a rebate," said Dan Rickman, an economics professor at Oklahoma State University who specializes in regional economic analysis and reviewed the Nevada studies for The Times.
Further, Tesla will collect benefits upfront, which could starve local governments of vital revenue, said Peter Fisher, an Iowa expert on tax incentive programs.
"They're giving back 99% of Tesla's direct taxes in the first nine years, yet there are going to be all these new workers with families and children," said Fisher, research director of the Iowa Policy Project and a professor emeritus of urban and regional studies at the University of Iowa. "One way or another, I think the locality is going to find themselves with a strain on local government services."
Hmmmm... We wonder where we've heard this before. Oh, yes. That's right. The Atlantic's Richard Florida and the LA Times' Michael Hiltzik were among several actual economic thinkers who were warning us not to buy into #Teslamania. And there's a reason why Good Jobs First has been criticizing the Tesla deal. While Tesla and its technology hold plenty of promise for the future, there's no guarantee that the State of Nevada's $1.2 billion corporate welfare gift card to this company will magically wash away all of Nevada's economic woes.
But hey, what do public policy think tanks and top-grade columnists (who actually know what they're talking about) know about any of this? According to certain local media pundits, they just don't know how to "play long ball" because they refuse to sit back and enjoy the bright & sunny "optics" emanating from The Governor's Mansion.
Even some local officials in Reno & Washoe County are now admitting there are indeed high costs to the Tesla deal. After all, this deal was never truly "free". Roads, schools, mass transit, and water infrastructure will be needed. And last we checked, those are never free.
And we'll eventually discover how much economic benefit the state will gain from this. Hopefully, it will eventually be enough to make this trade-off worthwhile. But now, it's becoming increasingly obvious that the Governor's rosy projections were way too rosy.
Economists often like to joke that there's truly no such thing as a "free lunch". Here in Nevada, it looks like we'll have to learn that lesson the hard way. Again. Even after we took a bite out of that rotten Apple.
Did you hear? Everything is coming up roses! We will be greeted as liberators! Just take a look on the bright side of life! And no matter what, always make sure to admire the bright & sunny "optics".
Last week, the mantra was supposed to be, "Ratification is different from rubber-stamping." But now that Tesla secured the deal it always wanted from Carson City, even the media pundit who uttered those words before the 28th Special Session of the Nevada Legislature is now upset because some legislators didnt rubber-stamp the Tesla deal quickly enough.
Wait, what?! Sadly, even some highly esteemed leaders of the Fourth Estate have caught #Teslamania.
Last week, The Atlantic's CityLab Editor-at-Large, Richard Florida, tried to warn those in Carson City of the risks of placing all of Nevada taxpayers' eggs in one "economic development" basket. And now, Los Angeles Times business columnist Michael Hiltzik is essentially calling our state's leaders "suckers" for approving the Tesla deal so quickly without analyzing the true cost of all the giveaways Tesla demanded along with the possibly way-too-rosy economic forecasts from the Governor's Office. Oh, and Good Jobs First continues to question the wisdom of allowing such a profitable company to operate in Nevada completely tax free for the next decade.
A cool $195 million is already leaving the state's coffers for Tesla corporate headquarters. And that's while Northern Nevada local authorities are just starting to realize the strain on local infrastructure that they just agreed to. How will we pay for the new roads and schools in Washoe, Storey, & Lyon Counties? And how will this affect state funding for the already overcrowded Clark County School District (CCSD), the already overburdened Southern Nevada transportation system, and still-in-need-of-some-TLC Southern Nevada economy?
Yesterday, the above mentioned media pundit used his Sunday Column to chide all the "ivory tower know-nothings and southern partisans" who dared to question Governor Brian Sandoval's (R) "play long ball"/"swing for the fences" strategy. Oh, really? What in any of this deal is "long ball"? How did Sandoval's "economic development team" "swing for the fences" by agreeing to the same old corporate welfare that this state has always tried to use to "diversify our economy"? How's that working out for us? The only difference this time is that the Tesla corporate welfare package is 14 times greater than the previous record setting Nevada corporate welfare package (cough- Apple -cough).
Look, we know Tesla likely has a bright future ahead. We even realize Tesla's potential role in a climate change/clean energy/human survival breakthrough. We can't understate the promise of the ground Tesla broke in Storey County.
We're just wondering why we're once again trying to substitute short sighted corporate welfare for long sighted economic planning. If we truly care about the well being of our state and our people, we know how to secure a far better bang for our buck. Yet in order for us to score this kind of real "long ball" deal, we'll need to approve it ourselves.
Early this week, leaders of the eight greatest developed economies met in Lough Erne, Northern Ireland (UK), for the G-8 Summit. At the G-8, President Obama, British Prime Minister David Cameron, German Chancellor Angela Merkel, and others tackled a number of thorny issues, such as the ongoing civil war in Syria. Another major issue tackled this week was corporate tax evasion.
So what did everyone ultimately agree to?
Has the G8 made progress cracking down on multinationals playing off one regime against another to lower its tax bills?
The world leaders have called on the OECD, the body that draws up international guidelines on tax, to draft a template for multinationals to report the tax they pay to taxing authorities in each jurisdiction in which they operate. Cameron claims this will "identify where multinational companies are earning their profits and paying their taxes so we can track and expose those who aren't paying their fair share". Tax campaigners, however, suggest it does not go nearly far enough. There was no commitment for this information to be made public or for companies to provide greater disclosure on other economic activity on a country-by-country basis.
What about closing loopholes in international tax rules exploited by firms such as Google, Apple and Amazon?
Several issues around taxing multinationals are being worked on furiously by the OECD before a wider G20 meeting of finance ministers next month. The G8 promised to "take the necessary individual and collective action" to back up any recommendations from recasting the rules. As a broad statement of intent the G8 leaders said: "Countries should change rules that let companies shift their profits across borders to avoid taxes."
So G-8 leaders agreed to share more information. Otherwise, they mostly just agreed they and other countries "should do something" on corporate tax evasion. We'll see how far this goes.
But hey, at least they acted embarrassed over this. Here in Nevada, however, our state and local governments have rewarded Apple's "unbelievable chutzpah" by showering the multinational corporation with corporate welfare! Even as the rest of the world has become increasingly outraged over Apple stiffing public coffers by exploiting as maby tax loopholes as possible, Governor Brian Sandoval keeps heralding Apple's corporate welfare as "economic development".
But really, is that true? Does Nevada truly benefit from rewarding companies that come here just to avoid paying taxes elsewhere? When did crippling austerity become "economic development"?
Think about it. There's a reason why G-8 leaders were shamed into bringing up corporate tax evasion. While these powerful multinational, multi-billion dollar companies come to Nevada and go elsewhere to avoid paying their bills, real people are suffering the consequences of austerity. Since they don't pay their fair share, we're paying for their sins instead.
Every so often, we're reminded (again) of the incredible sweetheart deal Apple now enjoys here in Nevada. Even as Apple (mis)uses Nevada to avoid paying (California) state and federal taxes, the tech giant has scored an $89 million shroud of legitimacy here. Yet while Apple basks in the glory of its Nevada sweetheart deal, the company faces increasing scrutiny from Members of Congress.
Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.
“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations that is holding the public hearing Tuesday into Apple’s use of tax havens. “Apple successfully sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”
Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple’s total revenue.
At that hearing earlier today, Congresscritters on both sides of the aisle were horrified... But one still wanted his daily Apple.
"If anyone should be on trial here, it should be Congress," [Senator Rand] Paul [R-Kentucky] declared. "I frankly think the committee should apologize to Apple.... I would say what we really need to do is to apologize to Apple, compliment them for the job creation they are doing, and get about doing our job.
Nearly three years ago, after much of the country -- and much of Congress -- was condemning BP for the massive Deepwater Horizon oil spill, Rep. Joe Barton (R-Texas) apologized to the oil giant, saying it was wrong for Washington to try to hold the company responsible for its failures.
And now, it's Rand Paul wanting to apologize to Apple for questioning its tax-avoidance schemes. Amazing.
Now to be fair, Senator Paul has one valid point. Congress has allowed the corporate taxation regime to fall into a mound of Swiss Cheese as multinational corporations like Apple exploit countless loopholes to avoid paying taxes. But of course, from there Senator Paul's rant descended into pure nonsense. Yes, Apple's "legal" tax evasion truly is a problem.
Paul aside, the bipartisan tone was one of assailing Apple for using Ireland-based shell companies to avoid U.S. corporate income tax. Said Sen. Carl Levin (D-Mich.), chairman of the subcommittee: “The offshore tax-avoidance tactics spotlighted by the subcommittee do real harm. They disadvantage domestic U.S. companies that aren’t in a position to reduce their tax bills using offshore tax gimmicks. They offload Apple’s tax burden onto other taxpayers – in particular, onto working families and small businesses. The lost tax revenue feeds a budget deficit that has reached troubling proportions, and has helped lead to round after round of budget slashing and the ill-advised sequestration now threatening our economic recovery.”
And ranking member John McCain (R-Ariz.) added, “Apple’s corporate tax strategy reflects a flawed corporate tax system that allows large multinational corporations to shift profits offshore to low-tax jurisdictions. For years, Apple has opted to forgo fully contributing to the U.S. treasury and to American society by shifting profits and circumventing U.S. taxes. In the last four years alone, Apple has avoided paying taxes on $44 billion in income.”
And as we've discussed before, this is a serious problem. After all, taxes are the price we pay for civilization. So when corporations like Apple exploit numerous loopholes to stiff the feds (and the states), we can expect less civilization.
Stuffing revenue in some low-tax, high-privacy bank in the Caribbean? 'Bout as forward-thinking as a Blackberry. Apple, as the New York Times reported today, uses nothing less than the iPhone 5 of tax havens, exploiting the loopholes of the international tax system in such a way that billions of dollars in profits have not been listed in any tax filing anywhere.
At the center of the operation is an Ireland-based subsidiary called Apple Operations International, which collected $30 billion in income between 2009 and 2012. Over the last five years, Apple Operations International has not filed a tax return in any country.
As USC law professor Edward Kleinbard told the Times, "There is a technical term economists like to use for behavior like this: Unbelievable chutzpah."
The revelations about Apple's tax strategies emerged from a Congressional investigation into the company's finances. The examination found that Apple "shifted at least $74 billion from the reach of the Internal Revenue Service between 2009 and 2012," according to the Times. The most startling discovery, though, was in how Apple's tax plan was so effective. [...]
Every dollar Apple saves, of course, is a dollar that doesn't go into America's public bank account. Which means one less dollar to go into education or health care or some other government service; or one more dollar to be pulled from somebody's paycheck. While Apple's revenues make it among the country's largest tax-payers, the Congressional investigation reported that the Silicon Valley giant paid a tax rate of 20.1 percent, which is four to 12 percent lower than it lists in its disclosures.
Across the nation, school districts are being forced to shut down schools "thanks" to recent state and federal budget cuts. And here in Nevada, the state faces a possible law suit for chronic underfunding of public education. Even Nevada State Board of Education President Elaine Wynn recently admitted, "We are grossly underfunded." Schools continue to fall apart, classrooms continue to overflow, teachers continue to face constant threats from administration, and students continue to suffer.
And why? So that Apple and other multinational corporations can engage in "legal" tax evasion? So that their executives can bask in the glory of slightly bigger profit margins? How is this helping any one? Think about it.
Last year, we were raising red flags when Nevada State, Washoe County, and Reno City officials rushed to supply Apple with cover right on the heels of The New York Times catching the multinational tech giant red handed in tax evasion (and misusing Nevada's lax tax laws to do so). Not only was our state swooping in to (inappropriately) cover Apple executives' asses, but this exposed Nevada to some serious risk. But wait, what would that be?
Think about it. Apple has effectively exploited numerous loopholes to avoid paying corporate taxes to California and the federal government. What made Governor Brian Sandoval (R-Denial) and various Northern Nevada politicians think we would never face the same fate?
Well, to be fair, Apple finally seems to be moving on the new data storage center long promised to Washoe County. However, the also promised Downtown Reno business center still looks very MIA. And one must wonder just how worthwhile that $89 million worth of corporate welfare tax breaks is turning out to be.
Before Apple officially selected Northern Nevada to house its fourth data center project, both the city of Reno and Washoe County agreed to nondisclosure agreements with the company until the plans for the project, including $89 million in tax breaks, were announced at public meetings in June 2012. [...]
Generally, the area where Apple could build in downtown Reno is limited to the so-called Tessera District, which is a state-sanctioned (and City Council-approved) “tourism improvement district” located in one of the city’s most blighted neighborhoods. It encompasses the northeastern section of downtown east of Virginia Street and north of Fifth Street.
The Tessera District will allow Apple to keep 75 percent of the sales taxes it owes on equipment purchases for the data center, saving the company an estimated $72 million in sales taxes that otherwise would have been paid to the state, schools and local governments over the course of a decade.
Last fall, the Reno Planning Commission gave its approval to a 14,800-square-foot light industrial building on an empty parcel at 520 Evans Ave., located on the southern edge of the Tessera District. [...]
While the building permit was issued in October, United Construction still has not picked it up. In April, the contractor requested an extension through Oct. 10 on the permit.
There's been a glaring lack of transparency with this project. And it's been unclear when Apple will finally begin delivering on its promises to Reno and Nevada. And many are still scratching their heads and wondering why Nevada would reward Apple for its "legalized" tax evasion program. (Imagine if Apple was instead a family in need of food stamps.) Thanks to Apple's "legal" tax dodging, the federal government lost $9.2 billion in revenue. That's money that could have kept 70,000 kids in Head Start, rescinded the 10.7% cut in unemployment benefits now taking effect, fully funded disaster relief efforts, and undone even more Manufactured Crisis induced budget cuts now ravaging the country.
The scheme that Apple cooked up this week to finance a $55 billion stock buyback for its shareholders was orchestrated to avoid paying $9.2 billion in taxes, Bloomberg reported Friday. That $9.2 billion tax bill that Apple dodged would have been enough to make unnecessary all of the major budget cuts we’ve been writing about this week as part of our “Repeal the Sequester” campaign. [...]
Apple was able to do this because of techniques it uses to keep its U.S.-made profits offshore, and because of provision in the tax code that allows it to deduct interest it pays on money it borrows. That’s a double whammy: It does not pay the taxes it should on the money it earns from all of those i-whatevers we buy (including the Macbook Pro I am using to type this post) and it gets money from the government when it borrows money from a big bank rather than using the money from its overseas stockpile.
Apple makes great products, but the obscenity of its use of the tax code to avoid paying its fair share for the functions of government that make its success possible is only exceeded by the tax code itself and the nexus of ideology and corporate greed that created it.
This latest news from Apple underscores the need to end corporate tax evasion – not with lobbyist-written schemes like the “territorial tax” that would essentially engrave offshore tax dodging into the tax code but with fair, more progressive tax structures that require corporations to pay taxes on their earnings just as working people must by April 15 every year.
Nevada is now feeling the pain of the latest Manufactured Crisis, along with the rest of America. So why again are we rewarding a company that's refusing to pay its fair share? Why are we rewarding a company that's denying the federal government revenue that could have been used to help people and maintain our public infrastructure?
And in case that's not bad enough, Apple now wants a "tax holiday"! Supposedly, it's to encourage "repatriation" of corporate investment in America. Over the weekend, The Guardian's Heidi Moore reminded us of what happened last time we tried this.
Companies had a tax holiday once before, in 2004, when a set of major corporations were allowed to bring back their overseas profits at a tax rate of only 5.25%. You might imagine that it resulted in an enormous economic boost, but here's what happened instead, in the words of Treasury official Michael Mundaca:
"There is no evidence that it increased US investment or jobs, and it cost taxpayers billions … the nonpartisan Congressional Research Service reports that most of the largest beneficiaries of the holiday actually cut jobs in 2005-06 – despite overall economy-wide job growth in those years – and many used the repatriated funds simply to repurchase stock or pay dividends."
So we tried a tax holiday before, it accomplished nothing except lining some corporate coffers, and it hurt the economy. It actually gave a kind of moral permission for companies to cut jobs, even when the economy was booming.
Perhaps this time will be different... But only if there are strings attached. Rep. John Delaney (D-Maryland) has proposed a corporate tax break in exchange for investment in infrastructure bonds. At least that isn't a total giveaway.
On the other hand, Carson City has been giving away the entire store and doling out tons of corporate welfare. And what have we seen in return? Oh, we have amazingly busted public infrastructure and an incredibly tattered social safety net. Multinational corporations avoid paying us taxes, and we get screwed.
Alas, it's incredibly difficult for Governor Sandoval and Nevada legislators to agree on any kind of "T Word" change that would make the wealthiest and most powerful corporate interests pay something closer to their fair share. And in turn, it's incredibly difficult for them to provide what our state truly needs. This is why we're stuck with busted schools and broken hospitals and plenty of pain for the 99%.
This is the problem. As long as we fail to change the status quo, Nevada will remain the King of Pain. And the same is true in Washington.
Think about it. Why are our people suffering? And why are companies like Apple rewarded for tax evasion? Is this pain truly necessary?
So Former Assembly Member Steven Brooks is back in the news today. Brooks was supposed to be at a court hearing in Las Vegas today. He couldn't make it... Because he was at a court hearing in San Bernardino County, California.
Here's what's happened so far.
The lawyer for a former Nevada lawmaker charged in a car chase and a police confrontation is asking that his client go through a mental health court program.
Ex-Assemblyman Steven Brooks appeared in a San Bernardino County, Calif., court Tuesday after pleading not guilty to charges stemming from his arrest March 28. Prosecutors say there could be a decision Friday on whether he's eligible for mental health court.
Mental health courts divert people into treatment programs and hold them accountable along the way.
Late in March, Steven Brooks was arrested in Victorville following a dispute with a tow truck driver in Barstow and a dramatic car chase with police. His attorney is now requesting for the California case to be transferred to mental health court. This way, he can finally obtain the treatment he needs.
At least there's a chance of Brooks obtaining the treatment he needs in California. Just before his latest arrest, Brooks sounded eerily prophetic in his final interview with Jon Ralston.
In four brief, surreal conversations, alternately heart-wrenching and frightening, shortly after he was expelled from the Assembly, Steven Brooks said he is "the assemblyman of sorrow," wondered why his colleagues "hate me so much" and declared he was going to "break the state" with a lawsuit worth at least $10 million.
Brooks was alternately angry, with expletive-filled rants directed at Speaker Marilyn Kirkpatrick and Majority Leader William Horne, despondent, weeping and saying he was checking himself into Seven Hills, a Southern Nevada treatment facility, and suicidal, saying he had no other recourse. [...]
"I'm the assemblyman of sorrow," he declared. "Why do they hate me so much? Fill in the blank: I'm so angry I could (blank) myself."
Brooks told me he was "on my way to Seven Hills to check myself into the hospital. He began weeping when I asked why, adding, "I have no other resort. I'm going to kill myself if they keep this up. I have nowhere to go. I'm the assemblyman of sorrow." [...]
"You know why they hate me? You know why want to kill me because I know all of their secrets."
No one expected what was coming next, probably not even Steven Brooks himself. Yet in an incredibly bizarre way, he warned us. Just days after Brooks was sent to jail in San Bernardino County, another former Nevadan emerged in California.
After The Sacramento Bee began investigating the mysterious Greyhound bus trip that landed James Flavy Coy Brown in Sacramento, the Nevada patient dumping scandal steadily grew. Now, there's a strong chance of Nevada facing law suits soon over improper discharge of mental health patients and transport of them out of state.
And now, outrage is spreading to a new state. Last weekend, ABC 15 Phoenix looked into the 100 cases of Rawson-Neal mental health patients bussed into Arizona. And while investigating, they may have uncovered yet another horrifying scandal in the making.
Mark Holleran, CEO of Central Arizona Shelter Services, says it's hard to track those patients down. He says "patient dumping" happens more than you might think.
"It just shows you how it's very easy to do this, and it's sort of under the radar. It's hard to detect," he said.
Holleran says a few years ago, former prisoners from Nevada got dumped at the shelter.
"They had been provided a bus ticket, a small amount of cash, a print out of a Mapquest that showed them how to get to CASS. And written on it was, 'ask for Howie,'" he said.
Holleran says these cases often end in chronic homelessness. He says that stretches resources in other states, like Arizona. And it passes along the problem, instead of fixing it.
"That might be something we might want to take a look at. Because if we can solve it for one place, I think we solve it for all the places," Holleran said.
So now, Arizona officials are reporting cases of Nevada patient dumping. And not only that, but we may have also dumped former prisoners on them as well! How about that for being a "good neighbor"?
One would think this would light a fire under the behinds of the Governor and legislators to fix this glaring crisis. Come on, we're now facing law suits and loss of federal funding! But no, they were too busy kissing the behind of Nicholas Cage. No, I'm not even making this up. And Ralston was downright revolted by today's lurid display of misplaced priorities.
James Flavy Brown can be shipped out of Las Vegas, leaving with barely his wits about him, some meds and peanut butter crackers. But the star of “Leaving Las Vegas” can be treated like royalty, with the mayor of Las Vegas as his sidekick, and an offer pending of enough taxpayer money to buy a peanut butter cracker factory.
These are the Legislature’s priorities – cut mental health funding, ignore English Language Learner money but give tax breaks to those who need them least. Brown gets a bus ticket to anywhere while Cage gets a national treasure trove worth of goodies and Apple gets a 90 percent tax break negotiated by the governor. That is tax policy in Nevada.
This is the state we are in.
I wonder if anyone stops to think: We may get Cage ghost-riding on the Strip, with his production company soaring and a Vegas backdrop for movies. But what does it say if that fake scene is juxtaposed a few miles off-camera in either direction with real tableaus of packed emergency rooms, overcrowded classrooms and jammed thoroughfares.
If this is part of a master plan, I’d like to see the drawing because it seems like a blueprint for disaster to me. What exactly is the policy articulated by this approach that allows $80 million to be cut from mental health services in five years but in one bill lawmakers are willing to give half of that amount [$35 million] to prospective Nevada-based filmmakers?
Lest you think my heart’s bleeding cuts off circulation to my brain, I get the job-creating argument, the economic diversification argument, the image-changing argument. But why is it a good idea for government to give incentives to anyone – movie producers, renewable energy companies – if offcials don’t provide incentives for people to really want to live here by supporting the quality of life, a culture that values higher and lower education, a political class that leads rather than follows?
He's right about this. It simply doesn't make sense.
Honestly, there may be some merit to encouraging more film production here in Nevada. But when we can't even take care of our own, who wants to risk shooting a movie here? Think about it.
Why is it that we always hear that "we can't afford" proper mental health care, decent schools, and repaired roads, yet our Governor and Legislature always seem to be able to afford corporate welfare to shower upon multinational corporations like Apple that neither need the help nor deserve it? Think about that as well. How on earth does this lead to a stable economy for our state? And how on earth does neglecting the most vulnerable in our society lead to a healthy economy?
It doesn't. That's precisely the problem. Our "leaders" in Carson City keep chasing after mythical economic unicorns while failing to provide the most fundamental building blocks of a sound economy.
Sure, luring Hollywood to Las Vegas sounds sexy. But ultimately, that won't mean shit for economic development if our schools keep bursting at the seams, our hospitals keep stuffing patients onto Greyhound buses heading out of state, and our roads are clogged with commuters while paved with just as many potholes. We seriously need to pay attention to the rude awakening we're now receiving. We must get back to basics, and we must do so before it's too late.
Last June, Reno, Washoe County, and Nevada state officials gushed with pride in announcing Apple's new data storage facility and business center in Washoe County. Just weeks after The New York Times exposed Apple's shell company in Reno as part of its strategy to evade California and federal taxes, officials here essentially rewarded Apple's atrocious behavior by bestowing $89 million worth of corporate welfare tax breaks in exchange for the data storage facility and Downtown Reno business center.
But wait, Apple did announce the data storage facility and Downtown Reno business center. Sure, it sucks that California and the feds lost out on tax revenue. But hey, at least we get something for it! Well, maybe not.
In January, we had a progress report on Apple's planned expansion into Nevada. Basically, there's been no expansion. There was still no ground broken on either the data storage facility or the Downtown Reno business center. Yet despite the clear lack of progress, Apple continued to cash in on the tax breaks and the relief of criticism deflected from Braeburn Capital, the Reno shell company set up by Apple to avoid paying taxes elsewhere.
So what's up with Apple now? Oh, there's just continuing lack of construction on both promised Northern Nevada projects. In fact, the building permit for Apple's business center has been sitting at Reno City Hall since October. Instead, another Apple project recently moved. Guess which one.
[Braeburn Capital is] still in Reno, on the corner of McCarran andLakeside, with a (small) sign out front, a locator sign in the lobby and a sign on the door. The firm moved about a year and half ago from its location at 72 0 Sandhill Road in south Reno.
Apleasant but guarded man answereda call at the firm's door this morning.He confirmedthat the third-floor office in the building at 6900 McCarran Boulevard is indeed the location of Apple Braeburn.He wouldn't identify himself, and referred all questions to Apple's Cupertino offices.
Meanwhile,the building permit for Apple’s proposed downtown business center has been sitting at RenoCity Hall since October.
That permit will expire next month,but the contractor behind the project, Reno-based UnitedConstruction,could ask the city for an extension.
Those extensions are usually approved by the city, said Fred Turnier, the community development director for Reno.
Oh, yes. That's right. There's been no action on either of the promised Apple projects for Northern Nevada. Governor Brian Sandoval and his budding reelection campaign PR team heralded these projects as breakthroughs in economic development. Instead, Apple is getting giggles at our expense.
Let's just admit it already. The gig's up. Using corporate welfare for "economic development" is not working. Instead, it's failing Nevada.
Last Tuesday, the usual crew of "business leaders" begged the Nevada Legislature to kill The Education Initiative. They blathered on about how "bad for business" a mere 2% margin tax on revenue over $1,000,000 is. Who needs better funded schools when the state has such a "great business climate"?
Yet how have we benefited from our supposedly "great business climate"? How has our commitment to low/no taxes helped economic development? Where are the jobs?
Apple is just one example of Nevada's failed policy of "promoting economic development" by way of corporate welfare. We promise no taxes, and we receive no benefit. There's something rotten in Reno... And in Carson City. And the only way Nevada can actually achieve true economic development is by getting rid of the rot.
Last June, Apple scored a sweet publicly funded bailout plan to build a new data storage facility in Northern Nevada. That plan was agreed to on certain conditions. One of them is the completion of a business and fabrication center in Downtown Reno. Yet so far, there's still no business center in Downtown Reno.
"The project is being proposed to be completed this year," said Craig Willcut, the president and CEO of United Construction during a Reno Planning Commission meeting in late September when the project was still in the approval phase. "The tenant is planning on occupying in December, so it's a fast-track project."
Today, the land where Apple is expected to build a 15,000 square foot building in downtown is still undeveloped. An approved building permit for the project has been sitting at Reno City Hall since late October waiting for a contractor to pick it up and pay $38,961 in permitting fees, according to Reno officials.
Willcut said he could not comment on the project and calls to developers working on the project did not return phone calls seeking comment.
So what does the delay mean? Who knows.
Regardless, Apple's plan for downtown Reno is to use the Tourism Improvement District known as the Tessera District the Reno City Council approved in 2009.
By setting up shop within the district, Apple would be able to purchase its computer servers for the data center while benefiting from a 75 percent sales tax break on purchases made within the district. Data centers require regular computer server replacements, a cost that adds up over time.
Apple promised to open this business center in Downtown Reno. And the construction firm hired by Apple promised to complete and open this business center by December 2012. Yet it's January 2013, and there's still no business and fabrication center in Downtown Reno.
Remember, Apple is being given $89 million worth of tax breaks. The state discounted 85% of property taxes for up to 30 years. The state also discounted all but 2% of the state sales tax for at least 4 years and up to 12 years. And Washoe County reduced Apple's effective county sales tax to a mere 0.5%. Apple got quite the sweet deal... And there's still no official contract? [...]
So we're willing to shower all this corporate welfare on Apple, but we're not willing to invest in our own people? We're willing to give Apple all the tax evasion bailouts welfare "special deals" it wants, but we're not willing to look out for our own long term economic health? Nevada, we have a problem. And it's more serious than you think.
This is why progressives and other tax reformers are so frustrated by what's been happening in Carson City. Apple scored an $89 million sweetheart deal. And Brian Sandoval touted this as "economic development". Yet so far, there's been little progress on the actual construction of at least one of Apple's promised "job creating" facilities.
What does Nevada have so far to show from the Apple bailout? That is, what does Nevada have to show other than the fact that Nevada is willing to reward companies for (mis)using our state to evade taxes elsewhere? (This is when we look at California.)
Yet when it comes to investing in real, good policies to encourage long-term economic health, Nevada is still very far behind. While Nevada government continues to dole out corporate welfare, it still can't provide the public infrastructure that's actually necessary for companies to start and grow here.
This is the chronic dysfunction that's at the center of Nevada government. And that "Gang of 63" in Carson City will need to get serious about fixing this if we're to ever have a functioning economy.
Hill, the director of the Governor’s Office of Economic Development, approved the abatements worth $89 million over 10 years on Wednesday. That was after a separate meeting in which the board unanimously recommended approval of the deal.
But their role was purely advisory — a break from the way Nevada has historically given out tax breaks. [...]
There is still no contract between the state and Apple, Hill said, only a short list of terms laying out the property and sales tax abatements and conditions to which Apple has agreed.
That drew sharp questions from Secretary of State Ross Miller, a member of the board.
“It appears the board is largely ceremonial,” Miller said after the meeting. “This is a significant departure from the past.”
He took issue with the property tax provisions that could last up to 30 years.
“My daughter, who’s in kindergarten, will be my age and still subject to the deal approved today,” Miller noted.
Remember, Apple is being given $89 million worth of tax breaks. The state discounted 85% of property taxes for up to 30 years. The state also discounted all but 2% of the state sales tax for at least 4 years and up to 12 years. And Washoe County reduced Apple's effective county sales tax to a mere 0.5%. Apple got quite the sweet deal... And there's still no official contract?
I don't know what else to say. I'm just reminded of what I said back in June.
Let's be real here. If this were an everyday working class Nevada person getting a sweetheart deal like this, many if these same politicians would be aghast in horror as they'd be taking their queues from teabaggers screaming, "WELFARE!!!! WELFARE!!!!!" Well, where are the teabaggers to call out the corporate welfare that the State of Nevada, Washoe County, and City of Reno are about to bestow upon Apple? So "WELFARE!!!!!" is evil if it's a working poor family trying to survive in this rough economy, but it's A-O-K for a multinational corporation like Apple? Sorry, but this is the most blatant and disgusting double standard I've ever seen!
Let's be honest here. Apple struck while the iron was hot and took advantage of Brian Sandoval's willingness to cut any kind of deal to save face and show Nevada that "he means business". Apple wins in opening a new data storage facility and paying hardly any taxes on it, while California continues to lose in not being able to collect the corporate income tax it's otherwise owed. Nevada, meanwhile, continues to be satisfied with mere economic crumbs.
So we're willing to shower all this corporate welfare on Apple, but we're not willing to invest in our own people? We're willing to give Apple all the tax evasionbailoutswelfare "special deals" it wants, but we're not willing to look out for our own long term economic health? Nevada, we have a problem. And it's more serious than you think.
Apple's comment on bringing the data center to Reno is as follows:
"We hope to build Apple's next data center in Reno to support Apple's iTunes Store, App Store and incredibly popular iCloud services. If approved, this project would expand our presence in Nevada and create hundreds of construction jobs over the next year, plus permanent jobs at the data center which will add to our existing total of nearly 400 employees in the state."
Steve Hill of from the Governor’s Office estimates the plant would bring 500 construction jobs in August. 230 direct jobs and 90 indirect jobs coming upon completion. [...]
Washoe County chairman Bob Larkin commented, saying:
"The Washoe County Board of Commissioners recognizes that, as a leader in the global economy, Apple has many choices worldwide for where they can locate and invest hundreds of millions of dollars, and the Board is extremely proud to endorse this project and be in the running to partner with them on such a prestigious economic development project. Having Apple in our community would put us on the global economic development map for other related industries.” Larkin continued, “This proposed high speed data center could bring hundreds of much needed construction jobs to our area in the coming months. In addition, Apple promises the investment of $1 billion dollars in our region over the next 10 years. The agreement to move forward with this project represents a watershed moment for our region's economic future."
Indeed, the fact that it was Apple seeking the tax breaks wasn’t publicly known until 8 a.m. Tuesday, less than three hours before the Washoe County Commission unanimously signed off on a deal worth $89 million in tax abatements over 10 years.
Apple won the county commission’s endorsement in a hearing that lasted a scant 20 minutes, during which no one testified in opposition or even rose to question the tax breaks.
Instead, the developer, Apple executives and lobbyists sung the praises of the project, and commissioners almost giddily endorsed the tax incentives before posing for a photo in the commission chamber with the businessmen who brokered the deal. [...]
[Reno City Council Member Dave] Aiazzi said Apple is striking at the right time, offering a recession-stricken community the prospect of high-paying jobs.
“If everything was good and the economy was great, we may not think this is such a good deal,” Aiazzi said. “But for the people who get the jobs out there, who are saying, ‘I need the money,’ for them it’s worth it.”
Let's be real here. If this were an everyday working class Nevada person getting a sweetheart deal like this, many if these same politicians would be aghast in horror as they'd be taking their queues from teabaggers screaming, "WELFARE!!!! WELFARE!!!!!" Well, where are the teabaggers to call out the corporate welfare that the State of Nevada, Washoe County, and City of Reno are about to bestow upon Apple? So "WELFARE!!!!!" is evil if it's a working poor family trying to survive in this rough economy, but it's A-O-K for a multinational corporation like Apple? Sorry, but this is the most blatant and disgusting double standard I've ever seen!
Let's be honest here. Apple struck while the iron was hot and took advantage of Brian Sandoval's willingness to cut any kind of deal to save face and show Nevada that "he means business". Apple wins in opening a new data storage facility and paying hardly any taxes on it, while California continues to lose in not being able to collect the corporate income tax it's otherwise owed. Nevada, meanwhile, continues to be satisfied with mere economic crumbs.
Now I can't completely blame local electeds in Washoe County for taking this deal. As I said earlier, something is better than nothing. And as long as our state's "leaders" continue to pursue these "quick fix" deals instead of taking the necessary long term action to secure long-term economic health, this may actually be the best we can get for now.
But looking forward, we must demand better. Think about it. While Sandoval's office is gushing over a data storage facility, where is the real tech innovation happening? Where is the real job creation happening? Where are the exciting tech start-ups happening? Oh yeah, that's right. Maybe California isn't that much of a loser, after all? And maybe Nevada will finally consider properly investing in our future?
The New York Times on Sunday outlined legal methods used by Cupertino, California-based Apple to avoid paying billions of dollars in federal and state taxes.
One approach highlighted in the report: Even though the company is based in California, Apple has set up a small office in Reno, Nevada, to collect and invest its profits. The corporate tax rate in Nevada is zero. In California, it’s 8.84 percent.
While many major corporations try to reduce their tax bills, technology companies like Apple, Google Inc., Microsoft Corp. and others have more options to do so.
And what have we seen as a result of Apple using us as a lame excuse not to pay California corporate income tax opening a Nevada office? Well, there's one fewer vacant office in Washoe County. And we have another cool Reno factoid.
Otherwise, we have nothing. And that's the problem here. Big corporations come here to Nevada to avoid paying taxes, and we have nothing to gain from it.
Yet as Apple hides its corporate profits in Reno, it actually hires people in Cupertino. And there's a reason for that. It's because Silicon Valley is full of top notch schools that are full of inquisitive students, tech companies there always have a rich pool of highly skilled workers to dip into and hire.
Perhaps Silicon Valley tech giants like to hide their corporate profits here in Nevada, but we're not really reaping any rewards from their tax evasion. Rather, we continue to deny ourselves a chance to create our own version of Silicon Valley by denying our state the revenue we need to properly fund public education. While it's nice to know Apple has an office in Northern Nevada, it would be nicer if we had the kinds of well paying high tech jobs that continue to go elsewhere.
