There are very few Americans who need welfare and government support less than Elon Musk, the hyper-creative head of the Tesla Motors electric car company, the Space X rocketry and satellite hoisting firm and Solar City, a leader in renewable energy.
And yet…almost no one gets more government benefits and business. The principle client of Space X, of course, is the National Aeronautics and Space Administration, better known as NASA, which depends on private enterprise – and Russian spacecraft – now that it has retired America’s space shuttle fleet.
Solar City thrives because homeowners are subsidized when they put photovoltaic panels on their roofs.
And then there’s Tesla, lately the orchestrator of a five-state battle over who could be exploited the most. Some states – notably Texas – call the handouts they give entrepreneurs like Musk “incentives” and governors like Brian Sandoval of Nevada and Rick Perry of Texas pride themselves on attracting additional jobs to their states this way.
But the questions remain whether corporate welfare is right, whether its costs outweigh benefits and whether companies getting it could survive without.
Would Tesla’s Model S be as popular as it is without the huge panoply of benefits it comes with? From the start, buyers of these toys for the wealthy (there’s plenty of room to question whether well-heeled buyers deserve welfare) got $7,500 credits on their federal tax returns. California has chipped in an additional $2,500 state rebate. That knocks $10,000 off the price tag.
Owners also can use carpool lanes on freeways when alone for years to come, and in California can compel their condominium or homeowners associations to allow them to install electric charging stations even if they don’t fit the aesthetics of the development.
Anyone who thinks those incentives don’t boost sales is simply naïve. The company also got a sweetheart deal when it took over the abandoned General Motors/Toyota factory in the East San Francisco Bay city of Fremont.
All that didn’t stir any loyalty in Tesla when it sought a location for a planned 6,500-job lithium ion battery factory. It landed just outside Reno after California didn’t match Nevada’s 20-year abatement of all sales tax linked to the plant, a property tax exemption for the next 10 years, reduced business and corporate taxes – and up to $150 million in cash from the state if the company eventually invests an expected $5 billion in the factory.
That adds up to $1.3 billion in cash and tax credits for a plant expected to hire 6,500 persons and create about 10,000 other permanent jobs. So for the privilege of hosting Tesla, the state of Nevada will pay well over $78,000 per job created. How long will it take to recoup that expense? And what about jobs lost when Nevada reduces its film production tax credits to help pay for Tesla’s welfare?
Nevada has never paid anything like that to casinos or other big employers. Nor has California ever paid a company so much. Plus, if Tesla doesn’t pay local property taxes, who will build schools and hire teachers for children of the new workers. Who will maintain the roads they’ll use, or their water and sewer systems? No one knows.
The larger question, of course, is whether any government should make such corporate handouts. Whenever American companies encounter similar subsidies of goods from other countries like China, Russia and Sweden, they gripe about unfair competition.
In fact, the subsidies to Tesla might be seen as unfair competition for other automakers – except that outfits like Nissan, Toyota, Volkswagen and Mercedes Benz have gotten similar but smaller welfare packages from Tennessee, Alabama and Mississippi. Why do you suppose Toyota is moving its national headquarters from Torrance to a suburb of Dallas? You can be sure it’s not because Japanese executives like the ultra-humid Texas weather or the frequent hurricanes.
The real question, of course, is whether any state or national government should allow itself to be extorted like this by any company. For sure, the way it affects fair competition among cars and other products is a perversion of the capitalist system.
But don’t expect Musk or any other corporate kingpin to stop seeking big government bucks in exchange for moving jobs around. As long as politicians vie for the privilege of handing out taxpayer money, this slimy practice will continue.