Johnson County $4 billion Panasonic plant may get $8 billion in taxpayer incentives: report
Panasonic is expected to invest some $4 billion in a new De Soto battery plant, but it could receive twice that amount in taxpayer incentives.
The Japanese electronics giant is poised to get as much as $6.8 billion from provisions in last year’s federal Inflation Reduction Act. That’s according to incentive watchdog group Good Jobs First, which analyzed the potential windfalls five electric vehicle battery plants could receive from a new tax credit program.
Good Jobs First says the 45X Advanced Manufacturing Tax Credit, which aims at increasing production of electric vehicles, could cost American taxpayers $200 billion over the next decade — far higher than previous estimates.
State and local taxpayers have already heavily subsidized Panasonic’s battery plant, which crews are currently building on a portion of the former Sunflower Army Ammunition Plant.
After signing nondisclosure agreements, Kansas officials agreed last year to award Panasonic $829 million in incentives from a new program designed for the firm. De Soto added another $200 million in local property tax incentives, Johnson County committed $15 million for new infrastructure and the state transportation department carved out $26 million for road improvements. The state later handed over the Kansas Bioscience Authority building in Olathe, valued at nearly $5 million, to Panasonic for free.
Altogether, Good Jobs First calculated the company could be in line for $8 billion in support from local, state and federal governments.
“I’m just concerned. This whole green energy program, the only way it stands on its own two feet is with all these government subsidies,” said U.S. Sen. Roger Marshall. The Kansas Republican said he wants to see Panasonic’s De Soto plant succeed, “but I am concerned about the amount of money they’re being subsidized on the backs of hardworking Kansans.”
The incentives could continue to grow.
“I would say that this is an undercount,” said Jacob Whiton, research analyst at Good Jobs First.
A Panasonic official acknowledged the company’s De Soto plant would qualify for the program, but said the exact amount of tax credits will be determined by the federal rule-making process, which is still ongoing.
When the Inflation Reduction Act passed last August on a party line vote, Democrats claimed the bill would cut healthcare prices, help Americans afford more climate efficient products and bring a wave of new jobs.
But the federal legislation didn’t include any job guarantees. And by March, Sen. Joe Manchin, a West Virginia Democrat who played a key role in writing the bill, began openly criticizing its implementation. He criticized the Biden administration over its rules determining which companies were eligible for the bill’s electric vehicle tax credits.
As the president signed the bill into law last year, the White House said it would “lift up American workers and create good-paying, union jobs across the country.”
But in its analysis, Good Jobs First noted that the tax credit for manufacturers of batteries and other electric vehicle components has no job or wage requirements.
Rather, those awards are based on overall production. So a company like Panasonic could earn billions from the federal government — even if all the work was done by robots.
Of the five plants it studied — including the Johnson County one — early indicators show plans to pay less than the going rate for auto workers. Nationally, the average wage for automotive production employees is $28.41 per hour — about $59,093 a year for full-time work — though union workers at GM and Ford factories can make six figures per year.
Kansas officials previously indicated Panasonic would pay an average of $50,000 per year. But the state’s agreement with the company included no commitments on hiring or on minimum wage or salary of those working at the plant — crucial components of many economic development packages.
“Of course, the Panasonic one is especially egregious on that count,” Whiton said. “Setting job creation requirements is sort of the lowest possible bar and not even having something like that is pretty indefensible. ... That would be our main recommendation: to just get a lot more demanding of companies that come hat in hand looking for subsidies.”
U.S. Sen. Jerry Moran, another Kansas Republican, noted that Panasonic committed to building in Kansas before the federal legislation was introduced in Washington. But the $8 billion taxpayer price tag for Panasonic illustrates his concerns with the Inflation Reduction Act, which he voted against, worrying the massive spending bill would worsen inflation, not alleviate it.
“What it suggests to me is that you have to fashion your incentive programs so that they provide enough incentive to help the business make that decision,” Moran said. “But you want to do it in a way that’s really fiscally responsible.”
$2 million per job
In its analysis, Good Jobs First relied on company press releases, earnings calls and news stories to calculate the potential benefit to battery makers. But the public may never know the full scope or who benefits from the program as companies are not required to publicly report when they cash in or sell the credits.
The organization has closely tracked the arms race among states vying to land new factories building electric cars, batteries and other green technologies.
American consumers have increasingly been moving from gas to electric vehicles. The International Energy Agency reports more than 2.3 million electric cars were sold across the globe in the first quarter of this year — a 25% increase over the same period last year. The agency predicts electric cars could have half of the American market share by 2030.
“So to what extent is the federal support and the state and local support just a windfall?” Whiton said. “This is really the central question in economic development.”
Subsidies at the five battery plants studied will range from $2 million to $7 million per job created. In De Soto, Good Jobs First predicts taxpayers will spend $2 million for each job created.
“Sometimes I look at the number of jobs that come out of some of these projects as compared to the cost of the incentives and I almost feel like we might be ahead to just simply send the employees a check from the state treasury and not ever build a plant,” said Kansas state Rep. John Carmichael, a Wichita Democrat.
The DeSoto factory is the Japanese firm’s first standalone battery plant in the United States. It also jointly owns with Tesla an electric vehicle battery plant outside of Reno, N.V.
Earlier this month, Panasonic’s technology chief told Reuters the company needed to open four more battery plants to reach its target production.
Jeff Warner, vice president of corporate and government affairs for Panasonic’s North America division, told The Star that federal programs like the Inflation Reduction Act make the United States a more favorable environment for major investments.
“We plan to allocate those tax credit funds back into investments in our EV battery business in the U.S., creating thousands of jobs and revitalizing communities around the country,” Warner said in a statement. “This includes training Americans for the jobs of the future, and expanding our investment in workforce development, educational partnerships, and programs in the local community to create additional opportunities.”
He didn’t offer any specifics on wages at the De Soto plant, but said they would be “competitive.”
When Carmichael first learned of Kansas and Oklahoma’s competition for a major plant, he worried that the Sunflower State was getting played. He worried Panasonic would spark a bidding war between the two states and end up building in both.
Since Kansas was selected, Oklahoma Gov. Kevin Stitt has announced a tentative agreement with Panasonic to build a $5 billion plant outside of Tulsa.
“Sometimes the rewards, if you will, from that expenditure of taxpayer money don’t really justify the jobs that were created,” Carmichael said.
Sen. Molly Baumgardner, a Louisburg Republican who voted against the incentives for Panasonic, criticized the amount of subsidies Panasonic would receive from all levels of government and noted that state-grown businesses are still recovering from the pandemic.
“That is a very bitter pill to swallow so to speak,” Baumgardner said. “That an entity that still is not physically here yet is reaping the benefits well beyond the original scope for the project.”
But, she lamented, Kansas had signed a contract and was locked into the deal it had made with Panasonic.
Incentive deal defended
Officials in Kansas Gov. Laura Kelly’s administration noted that the federal tax credits are awarded only after the company produces batteries. The state incentive package was fashioned around the total capital investment of building the plant and overall payroll once it’s running.
“They are different incentives for different activities,” said Patrick Lowry, spokesman for the Kansas Department of Commerce.
Though Panasonic has since announced plans to build more battery plants in the United States, Lowry said it was important for Kansas to be the first “in this part of the Midwest” to land a battery plant.
“Panasonic’s decision to locate its electric vehicle battery plant in Kansas will not only make the state the production epicenter for EV batteries, but will lay the groundwork for other innovative companies looking to relocate,” he said.
Kansas’ incentive deal included tax credits for Panasonic’s suppliers who might move to the state for easier access to the plant. Kansas officials and lawmakers have framed the plant as an opportunity to make Kansas a center for EV production as the industry grows.
“This transformative project will positively affect Kansas families for generations to come,” Lowry said. “The incentives offered by Kansas delivered the largest economic development project in state history.”
In a statement, U.S. Rep Sharice Davids, a Kansas Democrat, emphasized the economic potential of the Panasonic plant.
“Rep. Davids is proud to have worked with state, federal, and local officials from both parties to bring the Panasonic facility, along with the thousands of jobs it will create, to Johnson County,” her spokesman told The Star. “She is focused on using federal investments responsibly to make more goods in Kansas and grow our economy, so that Kansans feel the benefits directly.”
