Tax subsidies hurting CA

Tax subsidies hurting CA

Tesla Model S wikimediaYou might think individual tax subsidies, such as the film credit for Hollywood that just was tripled to $330 million, would help California. After all, they cut the taxes of some companies. Certainly, they help those individual companies.

But unless spending is cut to pay for it — which never happens — other businesses have to pay for the tax subsidies. Holman W. Jenkins Jr. just wrote for the Wall Street Journal how Toyota, after getting tax subsidies from the state, still couldn’t make a profit from its Nummi plant in Fremont. So it decided to cancel the plant.

But that happened at the same time as the “sudden acceleration” crisis, for which it actually was exonerated by the federal government.

The situation led to Elon Musk picking up Nummi at a bargain-basement price for his Tesla plant. Musk also has received state subsidies, although Nevada recently got his battery plant with $2 billion in subsidies of its own.


To its credit, the Los Angeles Times would level with its readers about Nummi, citing an industry consultant to the effect that “California just isn’t competitive in manufacturing with its taxes, regulations and overall cost of doing business.”

Perhaps the moral is obvious but dishing out handouts to favored businesses like Tesla at the expense of the state’s other taxpaying workers and employers is hardly a solution to California’s problems. And such Mommie Dearest love brings its own Faustian risk: The favored business can find itself, as Toyota did, under pressure permanently to subsidize a money-losing plant as a “success” politicians can point to even as their policies ensure that real success eludes other businesses in the state.


Contrast that with the policies of my home state of Michigan. Four years ago the outgoing governor was Jennifer Granholm, who was born in Canada but grew up in California’s Bay Area; she’s now a professor at U.C. Berkeley. According to a Journal editorial:

Democratic Governor Jennifer Granholm was a forerunner of President Obama ’s economic policy mix of raising taxes on everybody while handing out tax favors to the powerful and trendy. Michael Moore got a nearly $1 million tax break to film “Capitalism: A Love Story” in the state. The state awarded $543 million in tax incentives to battery makers in addition to $861 million in federal stimulus dollars. One of the state’s political capital recipients, A123 Systems, has gone bankrupt.

The result:

Unlike its Great Lakes neighbors, Michigan had been bleeding jobs for a decade. Between 2000 and 2009 Michigan lost 825,000 jobs, nearly half in manufacturing. The implosion of the Big Three automakers played a major role, but state policies exacerbated the carnage.

But in 2010, Republican Rick Snyder was elected governor; he’s running for re-election this year. And keep in mind that Michigan has nothing like Silicon Valley, which hardly was fazed by the Great Recession. He cut taxes, rearranged the tax system and got rid of some of the tax subsidies, such as cutting those for film. The result:

What really rankles Democrats is that Mr. Snyder’s tax shock-therapy and 2012 right-to-work law are working. Since January 2012, the Wolverine State’s private job growth (4.5%) has surpassed every state in the Great Lakes region save Indiana (4.6%). Last year, its private GDP growth led the region at 4.6%, compared to 4.4% in Wisconsin, 3.8% in Indiana and 3.5% in Ohio, and 2.6% in Illinois.

Illinois, like California, is run by a Democratic governor who raised taxes, Pat Quinn.

Of course, the weather still is terrible. On the other hand, you can buy a nice, middle-class home in a low-crime suburb for $120,000.







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  1. Ulysses Uhaul
    Ulysses Uhaul 10 October, 2014, 17:06

    To be successful you tackle low, be not afraid to clean toilets at your business, volunteer for the worst jobs in your company and make things happen by being productive and valuable , find a great mentor for your future growth and be not afraid to mentor those potentially better than yourself….


    Stop complaining and go for it…..our rental yard is booming and shattering records monthly, for only, I, Ulysses, could make quirky Queeg a model employee……he appears to have growth potential too!

    Reply this comment
  2. jgacy
    jgacy 10 October, 2014, 18:01

    What the heck are you talking about? That is irrelevant to tax policy.

    Reply this comment
  3. Ulysses Uhaul
    Ulysses Uhaul 10 October, 2014, 19:21

    It’s jobs….don’t take this stuff seriously……it’s manipulation…..your ruled just accept it.

    Reply this comment
  4. LetitCollapse
    LetitCollapse 10 October, 2014, 22:09

    As long as California continues to violate a basic law of nature, that is to reward the parasite and punish the producer, it will remain in constant failure mode until it eventually collapses. No state or nation can encourage such a policy and survive mid-term, let alone long-term. And, on top of that, when California promotes unlawful activities, like illegally breaking into the State, stealing jobs and working for cash under the table by refusing to enforce State labor laws, it only compounds the problem and hastens it’s own demise. Thinking they can stimulate the economy by rewarding the Hollywood pigs is hilarious. No doubt the conniving floosie Arnold lobbied hard for those tax breaks. If I had the power to deport naturalized citizens back to their countries of origin, Arnold would be on the first L.A. outbound flight to Vienna. And he could take his gubernatorial portrait with him.

    Reply this comment
  5. LetitCollapse
    LetitCollapse 10 October, 2014, 23:19

    Mr. Donkey – if you’re out there I wish your Bruins luck tomorrow. But they’d better bring their best game to beat my Ducks, even at home. However, if the Ducks play like they did against Arizona last week chalk up a win for the Bruins. I think the Ducks are favored by a TD. This game could decide who wins the Pac12. I don’t think Arizona can sustain their record. Their QB is inconsistent. The Pac12 has a strong conference this year. It’s comparable to the SEC. If you go to the game….enjoy.

    Reply this comment
    • LetitCollapse
      LetitCollapse 11 October, 2014, 17:05

      I’m surprised that Oregon has a relatively easy time with UCLA on their home field today. Looks like there was some angst on the sidelines between UCLA’s head coach and the defensive coordinator. They got into a huge shouting match with one another. Not a great thing to do in front of the players and spectators. If the def coordinator keeps that crap up he won’t be around too long. My employers used to call that ‘insubordination’ and people were fired on the spot for it. UCLA’s defense lost the game. The Ducks scored 42 points on ’em. Oregon plays Washington next week and Stanford 2 weeks later – then Utah. So they have their work cut out for them. Any one of those 3 teams could knock them off.

      Reply this comment

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