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Conservatives Kill Tesla’s Federal Subsidy, But Democrat States Continue Elon’s Gravy Train

Tesla Subsidies
Our friend Stephen Moore and the Committee to Unleash Prosperity won a big victory for fiscal sanity recently by helping kill the corrupt Obama-era "Tesla Subsidy."

This was the absurd federal policy of providing tax giveaways to buyers of electric cars. Taxpayers were writing $7,500 checks to those who purchased a new Tesla or other electric vehicle. Congress might as well have just given Elon Musk $1 billion.

As H. Sterling Burnett, a senior fellow on energy and the environment at The Heartland Institute, observed in a 2017 op-ed for the Detroit News, despite the federal government having provided a $465 million low-interest loan for Tesla to develop a cheap electric vehicle in 2009 and the billions of dollars in tax credits given to buyers, Tesla has continued to turn out $110,000 luxury cars designed for and marketed to millionaires. Those buyers obviously could afford to pay the full freight for their vehicles but instead took money from the poor and middle-income households to fund their “green lifestyle” purchases.

The first EVs were created as early as 1828, 50 years before Germany’s Karl Benz put the first gasoline powered vehicles on the road noted Mr. Burnett. Contrary to popular belief, EVs were never new, orphan technologies meriting government support to get off the ground. Gasoline-powered cars won out in the marketplace more than 100 years ago because they were comparatively more affordable, powerful, comfortable, reliable, and could go long distances between fueling — a combination of factors EVs can’t match to this day, despite the billions received in government support.

Spurred by the Obama administration’s focus on climate change (and we would argue a good deal of pay-to-play type corruption) government began pushing the uncompetitive technology once again in 2009, but in 2016, only 159,333 EVs were sold in the U.S. — less than one-tenth of 1 percent of vehicles sold nationwide. Tesla sold less than 47,000 of its $100,000-plus cars during that period.

Aside from receiving substantial federal tax credits and a massive government low-interest loan, Tesla and its wealthy customers also benefit from other subsidies given at the expense of everyone else, including state tax incentives and free charging stations. A 2015 study from researchers at the University of California at Berkeley and National Bureau of Economic Research analyzed by The Heartland Institute found the richest 20 percent of Americans received 90 percent of the hundreds of millions of dollars given in taxpayer subsidies for EVs.

The Committee to Unleash Prosperity found and publicized the data which showed that the vast majority of these handouts went to Americans making more than $350,000 - the top 1 percent. It was a tax cut for the rich - which liberals were hypocritically arguing FOR.

President Trump heroically told Pelosi that he wouldn't sign the tax extender bill if it included the Tesla subsidy. And the Speaker folded.

As Stephen Moore pointed out in a recent email, this may not seem like such a big deal -- it will save taxpayers about $1.5 billion in a $4.5 trillion budget -- but it is SO rare for Congress to take away a subsidy or entitlement once it has started we should all applaud it.

However, it appears Democrats at the state level will continue Elon Musk’s taxpayer gravy train.

Tax cuts for liberal oligarchs, or subsidy shopping, is a favored strategy of Tesla CEO Elon Musk (and other “green energy” oligarchs) as Ross Marchand, director of policy for the Taxpayers Protection Alliance, pointed out about a year ago in an article for RealClearPolicy.com.

As Allan C. Brownfeld, writing for Mises.org, observed, Tesla spends $1 million annually on Washington lobbyists to keep the gravy train going. Its cars have been financed by over $280 million in federal tax incentives, including the expiring $7,500 federal tax break and millions more in state rebates and development fees – California’s funding plan for fiscal year 2019-20 includes $238 million for the rebate program benefiting Tesla and other electric car makers. (We should also note Musk’s SpaceX has received over $5 billion in government support, but that’s a subject for another column.)

The Committee to Unleash Prosperity-inspired end of the federal Tesla subsidy was a victory for conservatives, however, as Mr. Marchand noted, even with the phase out of the federal subsidy, U.S. taxpayers at the state and local level will continue to foot the bill for Tesla's luxury vehicles because California, Nevada and New York are still subsidizing Tesla to the tune of hundreds of millions of dollars.

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