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Nevada Special Session Paves Way for Gigafactory

Nevada is one of the few states whose legislature typically meets once every two years, in contrast to the vast majority, which hold a legislative session once per year. While they are generally not scheduled to meet in even-numbered years, earlier in September Nevada legislators were suddenly called to work in a special session by Republican Gov. Brian Sandoval. The issue? To pass a massive tax incentive deal for Tesla Motors as a reward for choosing the state at the site of a massive new lithium-ion battery producing gigafactory.

After months of speculation and jockeying by southwestern states to curry favor and self-promote, it was announced on September 3 that the state would be the site of Tesla Motors new gigafactory, a massive $5 billion manufacturing facility that the all-electric motor vehicle manufacturer will use to create batteries for its popular and industry-leading electric-powered motor vehicles. While the automaker had previously hinted that they would like to have 10 percent, or $500,000 of the bill to construct the facility footed by the state, Nevada went above and beyond to cater to Tesla during the special session, pledging an estimated $1.25 billion in numerous tax incentives and breaks in order to win the nod of approval. As part of the deal, the state has reportedly agreed to waive property taxes on the factory through 2024 and all sales taxes levied on the factory through 2034, provide tax credits for each full time job created in the state and offer transferrable tax credits on further investment in the state by the Manufacturer. The fact that Nevada does not currently levy a corporate sales tax also undoubtedly played a role in the company’s decision making process.

The project itself has been described as one of the biggest economic development and manufacturing wins for an area in U.S. history and the largest project in the state since the Hoover Dam. The factory is expected to create up to 6,500 jobs in the state and at its peak supply batteries for 500,000 electric motor vehicles per year by 2020. “This factory is very important for the future of Tesla, because without it we can’t do the mass market car,” said Tesla Motors CEO Elon Musk.

The last important detail of the package included an agreement to lift the ban on direct manufacturer-consumer motor vehicle sales in Nevada, an issue which has been a thorn in Tesla’s side for years. Many states currently require vehicles to be sold through a franchised dealer rather than directly by the manufacturer; effectively outlawing Tesla from doing business in many states. Tesla has been intent on bucking that trend and selling vehicles directly to interested consumers and has seen legislative success in many states, such as New Hampshire which lifted the ban in 2013. While this legislative victory paves the way to more modern, mainstream success in the American motor vehicle market, the company still has many policy-driven hurdles to overcome before they become commonplace on U.S. roads.

Nations Capital Looking to Become 51st State

Residents of the District of Columbia have long bemoaned their lack of representation in the U.S. Congress. Its nearly 650 thousand citizens – more than the states of Vermont and Wyoming – are not afforded the simple luxury of having a say in government affairs and laws they do pass must first go through the grueling process of congressional approval, which like most congressional affairs is never a speedy process. One does not need to look far to realize that DC citizens are disgruntled about this state of affairs – their license plates are adorned with the phrase ‘taxation without representation’ referring to the fact that even though they pay federal income taxes, they have not yet been granted voting representation in Congress.

Residents, however, are hoping that could all change shortly as a result of S. 132, The New Columbia Admission Act. For the first time in over 20 years, congress is considering a bill that would finally grant statehood to the district under the moniker of ‘New Columbia’, which would encompass all of the non-federally owned land that currently comprises the district. Under the bill the federal government would maintain ownership of most buildings relating to the functioning of the federal government and all military lands. These areas would continue to be referred to as the District of Columbia. It would also prohibit the new state from imposing any taxes on federal property.

On Tuesday, residents, activists, and D.C. Delegate Eleanor Norton, the District’s sole non-voting member of the House, packed the room for a hearing in the Senate Homeland Security and Government Affairs Committee. Among those speaking included Delegate Norton and District Mayor Vincent Gray. However, The Washington Post reports that only two senators – the chair and vice-chair of the committee – actually attended the hearing, one of whom left shortly after commencement, calling the exercise a waste of time.

Granting statehood and thus congressional representation to the district would undoubtedly tip the balance of Congress, as the district is considered to be overwhelmingly Democratic. Should the bill even pass the Senate, for which prospects are dim, it would be dead on arrival in the Republican leaning House. Because of its heavily Democratic skew, granting representation would essentially hand two senators and one representative to that party – a nonstarter for House and Senate Republicans. While it is unlikely that the district will attain representation in this congressional cycle, supporters are hopeful that this hearing is symbolic of good things to come.

Voter ID Laws Loom Over 2014 Elections

In 2011, Texas enacted a strict voter identification law that mandated those wishing to vote present a photo ID at the polls in order to be permitted to do so. In 2012, the law was struck down under the Voting Rights Act of 1965, which mandated that certain states and counties receive prior approval from the federal government before enacting any change to voting laws.

Then, in 2013, the U.S. Supreme Court struck down this provision of the Voting Rights Act in the landmark case Shelby County v. Holder. This ruling opened the floodgates for many states to alter their voting laws that had previously been prohibited from doing so on their own accord. Today, the Federal government is using another still-standing provision of the act to push back against strict voter ID laws that have been passed by many states in the wake of the decision, and is having much success, opening up another chapter in this years long power-struggle between Federal and State governments.

The current challenge to the Texas law, among the strictest in the country, represents a microcosm of what has been going on in numerous states around the country in the lead up to the 2014 mid-term elections, where seats in 42 state senates and 45 state houses will be up for election. Earlier this year strict voting restrictions similar to those being challenged in Texas were struck down by federal judges in Arkansas, Pennsylvania and Wisconsin, a premonition that does not bode well for the Lone Star State. Indiana, Kansas, Mississippi, Georgia, Tennessee and Virginia also have similar strict identification requirements, with New Hampshire and North Carolina scheduled to join these ranks in 2015 and 2016 respectively. In total, 34 states currently have enacted some kind of voter ID requirement, according to NCSL data.

The immediate electoral ramifications of these laws are unclear; 2014 is the first major election year since the Supreme Court made way for many states to pass such laws. Proponents argue that they will reduce voter fraud and make elections fairer; opponents have successfully argued before federal judges that they are discriminatory in nature and are aimed at suppressing entire blocks of voters akin to the Jim Crow laws that existed in the South up to the Civil Rights era, laws that were effectively struck down by the Voting Rights Act of 1965. Should these new voter ID laws have the effect that those on the left fear, it could lead to further partisanship in state legislatures, where Republicans currently have a major advantage, holding a total of 58 chambers to the Democrats 40.

Currently Ballotpedia estimates that Arizona, Arkansas, Colorado, Iowa, Kentucky, Maine, Michigan, Minnesota, Nevada, New Hampshire, New Mexico, New York, Oregon, Pennsylvania, Washington, West Virginia and Wisconsin could all see one or both chamber flip partisan affiliation during the elections, which would have major ramifications for policymaking and state government for years to come. With Democrats expected to be on the defense at both the state and federal level, these laws may push the country into deeper red territory until the next set of national elections in 2016.

State Budgets Continue to Grow, But Less Than Expected

The long budget season in state legislatures is finally over, with Massachusetts and North Carolina rounding out the pack as the last states to enact a budget for fiscal year 2015, which for 46 states began on July 1. While the process is arduous, it serves as an effective measure how well states, and the nation as a whole, are doing economically. According to a recent nationwide summary of state finances by the National Association of State Budget Officers, or NASBO, while growth has been slow in most states, overall they are doing well. Expenditures in all 50 states are expected to increase by 2.9 percent over fiscal year 2014, marking the fifth straight year of growth following two straight years of decline following the great recession. While positive, this level of growth is considered sluggish compared to the 5 percent increase projected earlier in the year.

The continued growth in state budgets has been a direct result of overall increases in state revenues, with most states meeting or exceeding their budget forecasts for the year. According to NCSL, nine states including California were expected to exceed their budget forecast for the year; thirty-six other states were expected to meet their forecasts while seven were doubtful to do so. Twenty-two states will go over their expected budget for FY 2014.

A result of this continued positive growth in both state budgets and state revenue collection has led to a trend towards cutting taxes and fees, with those states making such cuts claiming them a way to further spur economic growth and pass some of this prosperity along to the citizenry. Overall, states have enacted $2.5 billion in tax and fee cuts across the board. This, however, has not always led to the anticipated results.

North Carolina, as a result of recently enacted tax cuts, was unable to meet its revenue forecast. Kansas is anticipating a major budget shortfall due to a now deeply unpopular tax cut package spearheaded by Republican Gov. Sam Brownback. These cuts, which Governor Brownback was elected campaigning on, may now see him ousted from office during the upcoming November elections in protest of these policies which have ravaged the state’s finances and economic outlook. The state is expected to have a $238 million budget shortfall by 2016, with deep cuts expected across the board. Kansas may well serve as a warning to other states that may be contemplating tax cut packages ahead of the 2015 legislative session.

NASBO has warned that while the outlook for states currently remains stable, this may not hold true long-term, as continued sluggish growth will likely create difficult budgetary choices in fiscal 2015 and beyond, since the current level of revenue growth may not be sufficient to cover continually increased spending in areas such as health care and higher education. With the 2015 legislative season only a few months away, all 50 states will once again need to begin the difficult budgetary process, and would be wise to keep the long-term view in mind, while heeding the lessons learned from Kansas.

Airbnb’s Success Confounds Regulators

Alongside many other high profile tech industry battles shaping up around the country, one of the biggest and most well-known revolves around Airbnb, an online service that allows users to rent out their home or certain rooms to travelers as a hotel-type service. The benefits of Airbnb are obvious, according to its proponents – it’s a cheaper, easier, perhaps faster way to access temporary lodging. Going further, Forbes’ Adam Ozimek argues that Airbnb’s success despite getting around safety regulations communicates the idea that those laws may not be necessary. Because Airbnb is so popular and functions well, it is possible that the additional requirements such as fire safety regulations and zoning standards are unnecessarily hindering the market. It’s not the illegal service that’s the problem; it’s the law. State and local officials however have not taken to this argument so keenly, claiming that the service operates illegally in the face of laws meant to regulate the hotel industry.

One of the most high profile spats has been between the ‘sharing economy’ service provider and the Attorney General of New York, who has demanded that Airbnb turn over all customer records over to the state as part of an investigation. Under state law, the way the company operates is thought to be illegal by the AGs office. Airbnb seems to have pulled out a win for the time being in this battle, as according to The New York Times a state judge has ruled that for the time being the company does not need to turn over customer records as part of the AG’s investigation, however this is unlikely to be the last chapter in this ongoing saga between the state and Airbnb.

Airbnb however has also been seeing many high profile successes, as it recently came to an agreement with the city of Portland, Oregon, allowing it to legally operate – the first agreement of its kind. Under the agreement, Airbnb will provide the city with one payment without providing the names and addresses of users out of concerns for privacy. It is possible that Airbnb would provide some information, such as anonymous ID numbers, during a tax division audit which the city carries out on most hotels every three years. The agreement was released Friday July 18 via public records request. A similar agreement is being worked on with the city of San Francisco, California, which has recently seen major opposition to their continued operation in the city, with residents claiming that it is a major force in driving up the cost of renting in the city.

While the issue has been brewing mainly at the municipal level at this point and has largely stayed out of state legislatures, the start of a new biennium in 2015 means a flood of new legislation in most states – undoubtedly some of this will be focused on reining in, taxing and regulating the innovative house-sharing service.