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Corianna Baier

Tesla is in search of a site for a new manufacturing plant, and Joplin has put itself in the running by offering $1 billion in incentives. The website that Joplin created lists the incentives, which includes a tax abatement for 12 years, tax credits, and sales tax exemptions. It seems Tesla would benefit from this deal, but would Joplin?

Measuring the success of economic development packages is challenging because it’s almost impossible to tell if any growth is actually due to the incentive package. Economic growth may have occurred without the incentivized project and new projects can happen without incentives. Research suggests that 75 percent of incentivized firms would have made the same location choice even without the incentive.

On top of that, the incentivized investments don’t always pay off. Tesla plans to build a large factory that could employ up to 7,000 people, but we’ve seen companies fail to live up to promises before (such as with Cerner in Kansas City). There’s really no guarantee that new jobs or infrastructure will come to the city as promised. Even if the jobs or infrastructure do arrive, it still might not be a net positive for the city, given the cost of the incentives. One study found that the costs and benefits of incentive packages are typically the same.

As I’ve previously pointed out, it’s probably not the best time to be giving out incentive packages. Government budgets are expected to be extremely tight due to COVID-19 and the resulting economic shutdown. Why should new, big businesses receive tax breaks while the citizens and businesses suffering through this pandemic in Joplin are left with their full tax burden?

With no guaranteed benefit and potential budget issues looming, offering $1 billion in incentives doesn’t seem like a great idea, and it definitely doesn’t seem like a good deal for Joplin’s citizens.

 

About the Author

Corianna Baier
Corianna Baier
Analyst

Corianna grew up in Michigan, where she earned her B.S. in Economics from Hillsdale College.