Tesla had about in $7.1 billion in net income last year and paid almost nothing in taxes… so they say. The outrage machine kicked into high gear and it’s easy to think Elon Musk is ripping off the nation and taxpayers. The story, honestly, is less about Tesla dodging taxes and more about how most of us don’t understand tax laws, business realities, and the way costs actually flow through a business. The loudest voices, that is politicians and the media, are counting on that ignorance to keep everyone angry.
How does a company like Tesla make billions and pay almost nothing in taxes? Tesla didn’t turn a profit for 17 years and tax law allows them to “carry forward” those losses. Let’s say they lost $2 million in 2010 and had a profit of $2 million in 2011. The company would effectively pay no tax on the profit in 2011 because of the losses the year before. This is deliberate policy to encourage investment and innovation. The same goes for the $1.4 billion in tax credits Tesla got last year for electric vehicles and green energy. These are the rules written where government tries to pick the winners and losers in the economy.
Businesses exist to make a product or service and earn a profit. Full stop. They aren’t charities, don’t exist to employ (although that’s a nice side effect), and sure as shit don’t exist to pay taxes. Tesla takes advantage of the laws enacted by people we elect or the rules enacted by the regulatory agencies as directed by those we elect. Why did Tesla bring in $2.8 billion in regulatory credits? EV mandates and carbon offsets. They sell these to other automakers and subsequently those automakers pass the cost on to their customers. The $1.4 billion in green tax credits? Climate change subsidies. Tesla is only doing what any smart business would do. They take advantage of the rules of the game.
Besides, companies never actually “pay” taxes. Taxes are just the cost of doing business. Every tax, fee, or regulation a company faces gets passed on, one way or another. That’s economics. The next time you hear someone scream ” But Tesla pays no taxes,!” try to remember that it’s true of all business in the end.
Politicians and the media love Tesla or Elon Musk tax stories, because it keeps the public angry. The media screams “corporations and billionaires dodge taxes!” while forgetting who created the rules, like EV mandates and green tax credits. Democrats bash “the rich” while carving out loopholes for their pet projects never thinking one day it might be someone they don’t like or agree with.
Tesla’s tax bill isn’t a scandal. Don’t fall for it. It’s all just people spitting in the wind with the public ending up with spittle all over their faces.
Read more about this in The Wall Street Journal (No Paywall Link)
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