$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.

By Aimee Picchi Apr 18, 2013 2:46PM

File photo of a Lexus ES 350 at the Chicago Auto Show in Chicago, Illinois on February 8, 2006 (© Scott Olson/Getty Images)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. 


More on moneyNOW

8Comments
Apr 18, 2013 3:28PM
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The Japanese auto companies need a weak yen. Around 108.00 plus to make money ! They are moving production over here because of the cheapness to produce autos in the USA . The tax breaks are a joke . It just sucks money out of the State and counties and cities around this plant . Its no diff for like Wal-mart and the sorts . At least they will pay healthcare and $14.00 an hour jobs like the Big Three does . Its nice to see the jobs ? But as they beat down the union wages to 1980s levels like the UAW has their will be no economic benefits like it used to be .But then i must say Toyota is the most recalled car company in the World..BTW They are adding production to a plant that's running at 45% capacity , not building a new one ! So much for construction jobs . So the net job creation is minimal. And one more thing , notice they said (The plan could bring a long-term investment of $531 million over 10 years from Toyota and create 750 jobs, ) The best word in that is COULD... It sure did not say WOULD. 750 jobs is better than nothing in KY..Or will there only be 350 jobs ?
Apr 18, 2013 4:32PM
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THE least venerable model in the Lexus fold! Ask ToMoCo in Japan if they care to produce their ISs, LSs, or (U.S. favorite) RXs here. Maybe their halo car, LFA? Sayonara to any of those possibilities!

1. Take a portion of Camrys already being assembled in Kentucky and pull the stapled body panels off.

2. Remold those same panels into smoother, more luxurious shapes; and then reattach them.

3. Replace the Toyota badges with Lexus ones.

4. Charge Joe American $1000s more in the dealership in addition to collecting $146.5 million tax break from US government.


Once again, the American public is being sold out by a government doing a half-a$$ed job! All for 750 jobs over 10 years?! No doubt monitoring some robot in the factory...totally unnecessary, and future target for cutting.

I wonder if the poor schmucks in the factory will even be told their actually assembling Lexi instead of Toyotas. Will they receive any requisite "premium" bump in their wages?

I think I know the answer already. Do you?
Apr 18, 2013 3:27PM
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OHHH but don't forget how over taxed they are in the US. BEFORE  all the loopholes, subsidies and tax breaks!
Apr 19, 2013 8:57AM
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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.

Apr 18, 2013 3:59PM
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The US has the highest corporate tax rates in the world and it can tax corporate profits made outside of the US BEFORE they are brought back as dividends. Credits are not loopholes, in order to get a tax credit a corporation either had to incur an expense ( i.e.  R&D) or pay a tax some where else.
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