Play ball (government giveaway edition)

If Nevada doesn’t give Oakland A’s billionaire owner John Fisher $500 million, would he still relocate the team here anyway?

Among people who study the impact of incentives on economic development, there is something called the “but for” concept, which asks, Would the business have gone elsewhere “but for” the tax breaks or public subsidies offered by the state where the business went?

“If incentives are provided by a state or local government to a firm, and the firm ends up choosing that state or local area, in what percentage of those cases would that decision not have been made ‘but for” the incentive?,’ asked the Upjohn Institute for Employment Research in a 2018 paper.

The conclusion:

“…a plausible range for incentives’ ‘but for’ percentage is 2 percent to 25 percent. For a typical state and local incentive package, in only 2 percent to 25 percent of the incented projects is the incentive decisive in tipping a location, expansion, or job retention decision towards that state or local area. In the other 75 percent to 98 percent of the time, the same decision would have been made without the incentive.”

Fisher already signed a reportedly binding agreement to buy the land near the Strip. While things could change in Oakland, news reports suggest the city’s government has wearied of haggling with Fisher, and vice versa, and his lease in Oakland ends after the 2024 season.

If Nevada doesn’t roll over for him, what’s Fisher going to do? Find another starry eyed mark to soak for $500 million?

The nascent details of the incentive deal, as first reported by the Nevada Independent, include transferable tax credits – that’s the $500 million. In the Review-Journal, ubiquitous government giveaway enthusiast and facilitator Jeremy Aguero invokes Tesla’s transferable tax credits as a model.

Here’s what those looked like:

“Transferable” means sellable, and the recipient – Fisher, if Nevada gives them to him – can sell them to the highest bidder. (Nevada isn’t the only state that issues transferable tax credits, and over the years they’ve sold for between 70¢ and 95¢ on the dollar.) There aren’t that many corporations in Nevada that have tax burdens in the tens of millions, let alone hundreds of millions. MGM bought Tesla’s $195 million allotment of tax credits. The resort industry would probably buy Fisher’s, too.

As the phrase “tax credit” suggests, instead of paying taxes with, you know, money, the purchaser of tax credits can pay their taxes with the tax credits. The state can then turn around and use the tax credits provided by the purchaser for — absolutely nothing at all. Once turned in to the state in lieu of taxes, the credits are worthless pieces of paper.

And things that the state might have spent $500 million on (pick your favorite) will be deprived of $500 million. A half-billion of state revenue will be diverted, most of it to Fisher, and the rest to whoever benefits from what is effectively a tax cut when they purchase the credits.

And Nevada’s budget will have a half-billion dollar hole.

To this day no convincing or compelling evidence has been produced showing that Tesla would not have come to Nevada “but for” all the incentives.

Could Fisher finance the move to Las Vegas without transferable tax credits and other financial incentives that are reportedly on the table? If Nevada didn’t give him cash and prizes, would Fisher go to the private sector for financing and bring the A’s here anyway?

We’ll probably never know. Because if the Tesla example is any indication, Nevada’s exploration of that question won’t extend beyond informally asking Fisher if the incentives are necessary. Who of course will say oh my stars and garters yes if we don’t get your goodies we just don’t know we’ll do. Or words to that effect.

He might even say “trust me.”

And if the Tesla example is any indication, that’ll be good enough for Nevada.

An earlier version of this column was originally published in the Daily Current newsletter, which is free, and which you can subscribe to here.