Subsidies for the Rich

I basically agree with Ross Marchand’s post at RealClearPolicy about Tesla:

But when the going gets tough, Tesla knows it can at least count on subsidies from various governments. The company, for instance, is only midway through a gargantuan ten-year $1.25 billion tax credit deal with Nevada, and can continue to pay far lower taxes than its competition as long as it maintains some manufacturing and properties in the state. The state hoped to pay for the tax credits by ending tax credits for the film industry, but due to overly rosy projections on how much business the film credits were supposed to bring in, the revenues didn’t nearly offset. According to data from the Nevada Department of Taxation, the film tax credit wind down has so far only offset around half of Tesla’s use of $173 million in tax credits thus far.

But Tesla is at least having some production success in Nevada, in stark contrast to their failed Gigafactory 2 project in New York. Musk promised that, if New York agreed to give Tesla $750 million to build a solar panel plant in Buffalo, Tesla would create 1,500 jobs for the region. Yet only one production line has been set up, and the factory employs less than 1,000 workers, according to Tesla’s head of energy operations. The deal was originally inked for Musk-owned SolarCity, which then had nearly $3 billion in debt and was eventually folded into Tesla. The consolidation came amidst a huge downturn in solar installations. Bloomberg reports that, “The company’s solar deployments are down more than 60 percent from their peak under SolarCity, and Tesla has laid off thousands of solar employees around the U.S.”

When dealt a bad hand, Tesla doubles down and…departs for China. While it’s difficult to estimate how much money Tesla is receiving from the Chinese government, Teslarati reports that the company “does enjoy the favor of the Chinese government,” including the benefit of an uncontested bid for the 860,000 square meter plot of land needed for their new Shanghai car factory and special, low-interest loans to defray 30 percent of factory costs.

There is, of course, nothing wrong with setting up shop in new states or countries in response to market conditions. Over the past several decades, the liberalization of international commerce has amped up the pace of globalization, lifting billions of people out of poverty. But in Tesla’s case, relentless subsidy shopping has left taxpayers high-and-dry, ensuring that few jobs are created in exchange for sky-high bills. While it is too late for tax and subsidy bills to be taken back, policymakers should learn from the sorry case of Tesla and keep sweetheart deals to a minimum. If Tesla can’t thrive in an area without relying on government largesse, then the best company offering the best services to consumers should win the day.

Whatever the sales pitch we shouldn’t be subsidizing the purchase of status symbols by the well-to-do and I feel confident that relatively few of the lower middle class or working poor are buying $100,000 automobiles. I don’t know the precise terms of the subsidy but the sticker prices of the vehicles for which they are available should be capped at something closer to $30,000 than to $100,000.

My view of Tesla is that it is and always has been a rent-seeking company with a sideline making and selling stylish EVs to the well-to-do. I see no reason for it to exist if it can’t make it on its own.

4 comments… add one
  • steve Link

    I largely agree with you here, but you do realize that states handing out tax breaks, cash grants, etc is the norm in many places? Texas has a fund just for this.


  • TarsTarkas Link

    Musk is a grifter and a showman. He supports anyone who shovels him more of the people’s money. And once it’s cut off, it’s see you later and f**k you and your family and friends.

    IMO subsidies for any commercial enterprise should be outlawed. It’s how we got Cancer Alley down along the Mississippi, among other catastrophes.

  • And yet the direction in which we have moved is away from government-operated organizations and to hybrids or subcontractors. Look at how things were being done 70 years ago. The federal government was actually producing things. It hired employees, ran organizations, made and built things, and provided services. Now it’s hiring private organizations to make and build things or provide services.

  • Gray Shambler Link

    “Musk is a grifter and a showman”
    And out hustling all of us. Dave is right, subsidies draw and drive financial activities that often have no value. They are the weakness of the socialist state, driven by social fashion, and should be gone.

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