$147 million tax break yields US-made Lexus
The incentive helped seal a deal with Toyota to move nearly all production of the ES luxury vehicle to Kentucky.
Toyota's (TM) luxury Lexus ES will soon be "Made in the U.S.A.," and all it took was $146.5 million in tax breaks from Kentucky.
The automaker is adding production capacity to its Georgetown plant, where it will build the Lexus ES starting in 2015, Reuters reports. Toyota's website touts two models for the Lexus ES, starting at about $36,000 and $39,000.
The plan marks the first time the luxury model will be made outside of Japan, with the Kentucky plant eventually producing nearly all ES models sold in the U.S. and Canada. The hybrid version of the ES will continue to be manufactured in Japan, however.
The plan could bring a long-term investment of $531 million over 10 years from Toyota and create 750 jobs, Consumerist reports.
Tax breaks for corporations are increasingly coming under fire as some people question whether taxpayers see any benefits. States, counties and cities are forgoing more than $80 billion annually in tax breaks to big businesses, according to the New York Times.
It's also nearly impossible for local governments to figure out whether the breaks actually returned an investment, because many don't track job creation. And if they do, it's hard to know whether those positions would have been created without the tax incentives, The Times notes.
At the same time, the federal government is letting billions slip through its coffers by providing tax loopholes to U.S. corporations. As reported Wednesday, the U.S. lost corporate tax revenue of $181 billion in 2011 because of breaks such as credits and deductions.
But Kentucky officials touted the agreement as a big win for the state.
"Securing this significant investment in Georgetown, Kentucky, would be a huge economic development victory," a spokeswoman for the Kentucky Economic Development Finance Authority told Bloomberg in an email.
Yet given that Japan was shipping the Lexus ES cars, which aren't even sold in Toyota's home country, across the ocean to sell in North America, it prompts the question of whether Toyota would have moved production stateside even without the incentives.
As Reuters pointed out, Toyota and other Japanese carmakers have been seeking to shift production to markets where they sell in part of a goal to cut costs.
I gave Chrysler Jeep a chance and had nothing but problems with the 2007 Wrangler Jeep and the engine crapped out at 35450 miles....fortunately right before the warranty expired and fortunately I had all the oil/filter change receipts. I now own a Toyota Tundra and the wife owns a Lexus IS250. Both run great and no problems. We also owned a 1997 ES300 which is still running great after 200,000 miles. Great to hear KY is going to manufacturer the ES. 700 +/- future employees will be standing on the assembly line, not the unemployment line. Who wouldn't think this is good news? An idiot, perhaps.
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[BRIEFING.COM] The stock market began the last week of July on a quiet note with the S&P 500 ending less than a point above its flat line. Like the benchmark index, the Dow Jones Industrial Average (+0.1%) also posted a slim gain, while the Russell 2000 (-0.5%) and Nasdaq Composite (-0.1%) lagged throughout the session.
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