Elon Musk's $4.9bn taxpayer windfall revealed That Elon Musk is a decamillionaire is true. That he's a great salesman is also true. But to whom is he selling, and what is it that he sells so well? There's a very reasonable argument that what he's actually good at is selling to bureaucrats what bureaucrats want to buy with our money. And while that's obviously a useful …
"You can't blame him, obviously. If it's raining free money, then why not collect some? But it is possible to have a vague feeling that this isn't quite how red-in-tooth-and-claw capitalism is supposed to work."
Why are we assuming Musk is a "red-in-tooth-and-claw capitalist"?
Furthermore, Musk did not go begging for these breaks. Fool government tries to tilt economic balance by placing a heavy thumb on the scale, shouldn't fret about someone actually making use of it.
The big problem The Left has with Musk is that he is successful. Apparently thats not how things are supposed to work, see Solyndra for an example.
Furthermore, Musk did not go begging for these breaks. Fool government tries to tilt economic balance by placing a heavy thumb on the scale, shouldn't fret about someone actually making use of it.
Regardless of whether you think the government foolish for intervening in the market, it's hard to argue a "red-in-tooth-and-claw" capitalist wouldn't be foolish for failing to take advantage of it. Or, more precisely, government subsidies and the like are a resource available to the capitalist, and that resource needs to be evaluated and exploited if it makes sense, under the sort of capitalist absolutism Tim is waving at.
So I'm afraid his argument doesn't stand. The purest of capitalists operating in Musk's areas would do as he does. If that doesn't look like how Tim (or someone else) imagines that pure capitalism, that's a failure of the real world to live up to the ideal - or a failure of the ideal to be realistic.
Please don't presume to speak for "the Left". I, for one, deemed a socialist in many respects, have no problem with Elon Musk's business endeavors.
As to the article, a lot of that $4.9 billion is nonsense. Musk builds a battery factory in Reno instead of Texas or wherever and "gets" to pay less taxes. Musk didn't get anything. He's still spending money on a plant and eventually property and other taxes on the Reno business operations. Tesla customers get a tax break for buying a car? Again, the customers "get" to PAY less taxes. Musk is paid nothing, though in theory, he might see better sales of his product. In practice, Tesla cars are so expensive that those who buy them probably aren't motivated by the tax break.
Musk has received actual government funds for his SpaceX company, in this case, the government wanted to motivate capitalists to provide more economic access to space. More likely, Obama wanted to use Space Shuttle and Constellation funds for some other purpose, whatever. Musk and SpaceX were doing what existing NASA contractors have done for years, take government money to develop a rocket.
Probably the only thing you can point to and scream subsidy is the solar business. So, out of $4.9 Billion claimed, how much was actual government largesse paid into Musk's hands again?
If the government offered you $1000 to buy a new machine to wordprocess your articles, I would judge you harshly if you ignored the money and limited your future ability to research articles better because you were short on cash. You write a lot of financial articles http://www.theregister.co.uk/Author/1692 and you should be able to recognise good business acumen when you see it.
Joe, while I get where you're coming from, I fear you have a poor grasp of the ratios of income tax versus earned income for America's citizens.
In 2012, the top 1% of earners (people who reported earning more than $434k) paid a tad more than 26.7% of all "individual" (i.e. not corporate) taxes.
In the same year, the top 10% of earners (people who reported earning more than $125k, and including the top 1%) paid 70.2% of all individual taxes.
The bottom 50% of all individual tax returns paid 2.8% of the income taxes collected that year.
http://taxfoundation.org/article/summary-latest-federal-income-tax-data-0
Where to define the break between the "common taxpayers" and the, what, "uncommon taxpayers?" is open for debate. As the data in the link has certain defined breaks, let's use the bottom 75%, which includes anyone who earned less than $73k. The bottom 75% of all personal tax returns filed in 2012 paid 13.6% of the individual income tax collected.
Based on the percentages paid, I would argue that the "uncommon taxpayers," which include the "rich people" you referred to, are overwhelmingly responsible for "prop[ping] up their [own] ventures". Ventures which employ thousands of people directly, and which facilitate the employ of tens or hundreds of thousands indirectly.
I should also point out that the income tax numbers above and in the link are only about half of the taxes collected by the feds for that year. I don't have a link handy for 2012, but 2011's individual income tax income was similar, and was supplemented by about as much from payroll taxes, corporate taxes, and various "other" tax streams, like customs duties and excise taxes.
http://www.npr.org/sections/money/2012/04/13/150441259/what-america-pays-in-taxes
I see you're using the standard talking points for "the rich are taxed too much" that uses shady statistical methods - the top 1% of earners or top 10% of earners do NOT earn 1% of all the income or 10% of all the income. Not to mention it only considers federal income tax, when payroll, sales and property tax not to mention state/city income tax is always larger than federal income tax for people making less than six figures.
Look at the numbers again with the SHARE of income the top 1% and top 10% make versus their share of taxes and it doesn't sound like the rich are being soaked quite so badly. What's worse is if you look at the share of income and share of taxes (all taxes, including payroll) of the next 10% you'll find they pay a higher percentage of their income in taxes than the top 10% do! That's the biggest unfairness with the US tax system that needs to be addressed.
When you look at the bottom 50% of earners keep in mind that they all make less than the median income which was $54,000 for a household (not an individual) in 2014. Instead of counting only income taxes, include what they pay in payroll taxes, sales tax etc. along with the taxes they indirectly pay like the employer half of payroll taxes, property tax if they rent, etc. and the amount of taxes they pay doesn't look so tiny anymore.
Someone who makes $30,000 may end up not paying any income tax especially if he has kids, but you'll find he pays a higher rate of taxes overall than the hedge fund guys who use the carried interest loophole and average a tax rate of about 15%. The $30K guy pays 15.3% for the employee/employer FICA tax alone!
Dump the SS tax and roll it into a flat federal income tax of 20% for every dollar over $20K (or whatever) that treats all types of income the same and dumps 90% of the deductions/credits there are these days and things would be a lot fairer (not to mention way simpler) But since it would "raise taxes" on the poor struggling hedge fund guys they'll never do that, they want a flat tax at an even lower rate and make poor guy struggling along at $30K keep paying the 15.3% FICA on top of it so he can never get ahead.
While I'm typically one who is called a leftist radical because I believe in a progressive tax system, the reality is that even when one takes into account things like carried interest for hedge fund managers or long-term capital gains, those top 1% do pay a much larger percentage of their income to taxes.
Though the Tax Foundation is often seen as a right-leaning think-tank, it is frequently used by both sides to bolster their arguments. Using the link provided by Justin S., one can easily see that for Adjusted Gross Income, the 1% have 21.9% of the reported income and pay 38.1% of individual income taxes collected. In other words, they are covering a lot of the income taxes not paid by the rest of the households. If you want to get even sillier, the top 5% have 36.8% of the AGI and pay 58.9% of all individual income taxes collected. That means that the households in the highest 5% of income in 2012 paid almost 60% of all the income taxes collected. That's 6.8 million returns out of 136 million filed. The next 5% (5% to 10%) pay "only" 11.2% of all of the income tax collected, while covering 11% of the AGI reported to the IRS.
You can start including payroll taxes and other things and present a tax incidence study of some variety... which the Tax Policy Center has done (my preferred source for tax-related info) and it too shows that as one walks up the income ladder, a larger share of income is sent to Uncle Sam. In 2013, the bottom 20% earned 4.2% of all cash income in the US, and paid 0.3% of all taxes collected, while the top 1% pulled in 17.4% of cash income and paid 29.3% of all federal taxes. Link: http://taxpolicycenter.org/numbers/displayatab.cfm?DocID=3806
Methodologies differ and some things are excluded, but the general message is that for all the whining, the super rich (or at least those with the most annual income) also pay a larger percentage in taxes, both as a function of income as well as a percentage of the total taxes due to the US Treasury. Could they pay more without too much of a haircut? Quite likely, at least the top 1 to 5% households. Does that further what we want to do as a country? That's a deeper question that can't be answered here... if such a thing exists.
Justin S., I'm looking at it from this angle: the effect of taxes on lower-income people has a much bigger impact on their finances than it does on higher-income people. If someone made $10 million dollars last year and paid $2 million in taxes, that leaves $8 million dollars in his pocket. However, if someone made $50,000 last year and paid $10,000 in taxes, he has $40,000 left for things like mortgage/rent, food, utilities, etc. In my opinion, the person with $8 million in the bank does not need a handout from the government (who took that money from other taxpayers).
That said, and I believe someone else mentioned something to this extent:
The person with $8 million in the bank, DID pay $2 million in tax...so in this little thought experiment, he's paid 99.50% of the total tax. I think the idea is that without the incentives, this person may not spend the rest of their money on anything productive. If they do have the incentive, more of that $8 million gets spent doing something productive, which...yes...enriches that person further, but that also brings in a net positive flow of money in the long run. And that means more taxes all around. And new technology.
And if we really think about it, the majority of the money that guy would be getting in the form of subsidy would be money that he himself put into the government's coffers. If that makes sense.
I'm not completely sure how I feel about all of it, but there does seem to be some merit to this line of thinking.
Looking at one company in isolation and you can condemn the government for pushing alternative energy.
How about looking at all companies?
For example, the government guarantees owners of pipelines a return on investment. They can set the price they charge for carrying fossil fuel products to guarantee 12% return. No market forces there.
So, before you get your knickers in a knot over the relatively small incentives for alternate energy, get the whole story on government subsidies for fossil fuels. The Koch brothers did not become beellionaires without a lot of help from government.
The author seems remarkably clueless about the role of government in capitalism, even in the supposed wild west of the United States.
Virtually every business exists in the context of laws, rules, regulations and subsidies, and these are at least as valuable as the solar and EV subsidies that Musk's companies are collecting
I'm sure you've heard how corn subsidies effectively lower the price of corn products in the US, resulting in much better candy in the UK than the US.
I'm personally pretty familiar with the US DMCA. It grants compulsory music licenses to internet radio stations, effectively raining free money to radio stations in exchange for their following certain rules. It also defines what types of material are subject to copyright. Not that there's anything necessarily wrong with that, but it certainly isn't a libertarian paradise. And the DMCA actually defines copyright, which isn't a naturally occurring property right, anyway.
Boeing got started by selling planes to the military and then turning around those same designs for commercial aircraft, quite an effective subsidy. You may have heard of Airbus -- I remember reading vaguely that they too may have received some subsidies.
Here in the US, the nuclear power industry gets liability limitations that make it much more economical to run nuclear power plants. The fracking industry has exemptions written into the clean water act allowing them to dump poisons into the water supply of people surrounding their drilling operations.
Some of the above are reasonable, some are criminal. But only a fool would truly believe that only Elon Musk benefits from governmental subsidies.
"But only a fool would truly believe that only Elon Musk benefits from governmental subsidies"
Is that what he said? I think he was just saying that Musk appeared to run a business optimised for the collection of money 'harvested' from the public.
The Sage Of Omaha has also said that the *only* reason he invests in wind farms is because the government cash makes it worthwhile. So Musk isn't the only one, it's just that his businesses all appear to do it with efficiency and alacrity...
Nothing wrong with that, either, if the subsidies are driving investment into the right areas. But the one thing we can say about governments is that they're always happy to spend taxpayers money on the basis that, generally, they can always squeeze the tit a little harder if they need to.
The last line of the article was "But it is possible to have a vague feeling that this isn't quite how red-in-tooth-and-claw capitalism is supposed to work."
It was that statement, and the overall tone of the article that somehow these subsidies were remarkable in size, that I found either naïve or disingenous. We have nothing remotely like "red in tooth and claw capitalism" in this country, and solar and EV subsidies aren't close to the largest subsidies you find.
HAHAHAHAHA!!! ROTFLMAO
While true that there were no income taxes 100 years ago, there was plenty of other taxes collected and there are ways besides tax dollars that governments enrich their favorite citizens. Thousands and thousands of acres land were given to the railroads along the rail lines they built. The government paid per mile for the trans-continental railroad to be built and let the railroads keep the rail line.
Pure capitalism has never existed and probably would not be something you'd actually care for if it did. The government has always been around to put some limits on and set some goals for private enterprise.
From wakipedia's entry for Space Launch System:
During the joint Senate-NASA presentation in September 2011, it was stated that the SLS program has a projected development cost of $18 billion through 2017, with $10 billion for the SLS rocket, $6 billion for the Orion Multi-Purpose Crew Vehicle and $2 billion for upgrades to the launch pad and other facilities at Kennedy Space Center.
If everything related to Elon Musk is under 5G$, then SpaceX is a bargain.
Exactly. And at least Elon Musk is actually delivering what he promises, at a much lower price than the US govt/NASA seem able to. This situation should be compared to the private finance deals that the Tories give to their chums, which usually cost several times what they would cost when done by a competent government department, and rarely (if ever) actually deliver anything useful.
"This situation should be compared to the private finance deals that the Tories give to their chums"
Well the latest Conservative government (shower of useless p***) haven't really had time to do much damage with PFI, it was largely a dirty word under the last Coalition (shower of useless....), but it was under the governance of your socialist mates (particularly useless shower of....) that PFI really flourished, with £56bn+ of deals inked by the financially illiterate idiot Gordon Brown, with total taxpayer repayments of around £220bn IIRC. The preceding Tory (Major) government merely dabbled with PFI, signing around £2.2bn of deals.
So, come again, "Tories give to their chums"? Surely you mean "Labour gave to their chums"?
The vast, toxic, costly legacy of PFI has been bequeathed to the British public almost entirely by the crooks and idiots of the Labour party.
Exactly. If you are looking for a snout and trough tale look no further than PFI in the UK. Example: a school build by a private company, under PFI, but is no longer needed. The taxpayer will have to continue to pay for this empty school for the next 30 years, or buy out the contract. Not for the build cost of the school, but for the projected profit on the contract. Now that is a snout and trough tale.
I think the problem NASA has is that the US started it's space program as part of a huge, very expensive, cold war pissing contest with the USSR. The US government would throw any amount of money into the programme as long as it kept delivering goals before the Ruskies.
As such, when the USSR collapsed, so did the US government's interest in beating them, and a lot of the funding dried up.
In the meantime, the various companies involved in the space programme got used to being given massive amounts of money. Companies in this position tend to be a little more relaxed about cutting costs. A lot of companies also assume that because something is government funded, the government won't bother checking the figures, so charge what they want. Believe me, I have experienced this, having worked in our local hospital and taken an interest in actively checking the figures.
Don't get me wrong, I am not criticising the US Space programme. It helped pave the way for massive advancements in technology (including computers) that we are arguably enjoying the fruits of now, and I suspect that SpaceX are also able to use them to reduce costs.
On to Elon Musk, I think $4.9bn is actually relatively cheap when you consider the potential benefits to mankind of what he has already delivered. Tesla has made massive advances in Electric vehicles, and particularly battery tech, many of which they have effectively open sourced. They have also increased sales of electric cars, which should reduce the sales of fossil fuel based cars, and thus (assuming they are charged by electricity from a renewable source) reduce pollution significantly. He has also effectively rebooted the US space programme, or enabled NASA to do so.
"Tesla has made massive advances in Electric vehicles"
No he hasn't. He stuck batteries from 2000 laptops and a motor on wheels.
In 2006 Monster Garage converted a Chevy Bel Air to electric with 384 Milwaukee tool 28v lithium-ion electric drill battery packs.
http://www.delsonproducts.com/monster-v28.htm
Tesla engineered (without any significant technological advances) this stupid, expensive, and impractical idea making it stupid, expensive and vaguely practical.
Unfortunately a lot of people are as stupid as the politicians he suckles from and see this engineering of a poor idea as a 'massive advance'.
So the new designs of motors, the battery conditioning tech and the high speed charging all just dropped on their laps?
Hint: in the first roadster the speed range of the motor wasn't enough so they tried a two speed gearbox. The motor consistently ripped it to shreds, until they decided to build a new motor which could do without the gearbox - turned out much cheaper and better that way...
The software driving that 17" display also took a little bit of putting together.
Musk is starting to look like a better candidate for the collarless jacket and white pedigree feline.
But I'll ask 2 questions.
When did those subsidies start appearing.
When were Musk's business founded.
If the businesses were formed after the subsidy you're probably right and Musk probably should have an honorary dorsal fin. If not maybe he really is a visionary who sees where the world will go before it decides it wants to go there.
You can't tell anything from the timeline. Someone like Musk has far easier access to the corridors of power to get those sorts of deals arranged, and he can keep it quiet. Ya'all remember private investor Ross Perot right? Gonna lift up the hood of the American enterprise and fix what was broken 'cause he was one of them private sector people who knew how to do those things, right? Except all the money he made came, entirely from government contacts, and frequently from contracts were he litigated the awards until all of his competitors dropped out.
I'm not a fan of Musk's politics, but like Hewlett and Packard, he's making actual useful stuff and selling it to real people, not just feeding at the government trough like Boeing, Lockheed, Airbus, etc.
Seems a bargain compared to the fossil fuel industry
"compared to the fossil fuel industry"
You mean the industry that fuels his rockets?
The industry that subsidises his solar panels by being a huge free (for him, expensive for us) battery that keeps the lights on when the sun don't shine?
The industry that provides the majority of the power his cars run on?
Claimed subsidies of the fossil fuel industry vary wildly because there are so many sets of made up numbers to choose from.
"because there are so many sets of made up numbers to choose from."
Yes precisely.
Every industry is subsidised along the way somewhere whether it's via tax breaks or via something more direct. It's a governmental policy decision to provide incentives for the outcomes we want. Now how that policy is determined is an entirely different discussion.
So to deal with some of the incentives
- factory incentives. These pop up for pretty well any manufacturer. Amazon $1.1bn http://uk.reuters.com/article/2014/09/16/amazon-aws-tax-idUSL1N0RH2A820140916
- including all the car incentives is garbage as they are available to all the other competitors. The list is large. Like every maker of a CARB compliance car for California.
- same for solar. Plenty of competition. Solar city has 39% market share. And they don't even make the panels, just install them. http://www.marketwatch.com/story/solarcity-vivint-shares-fall-despite-rising-market-share-2014-12-09
It seems the incentives are working, so what's the problem?
That's what they're there for!
The fuel "subsidies" are poorly calculated. To fairly brand an industry with the cost of made up subsidies, you also have to look at what the outflow subsidies are.
Any subsidy on diesel also has a flow on subsidy into cheaper food due to cheaper agricultural production, cheaper transport costs etc. Thus subsidy does not stay in the fuel sector.
Most of those "subsidies" are in costs associated with fuel use, not the actual production and sale of the fuel. So if you're going to make an apples-to-apples comparison you should say that car manufacturers are subsidised when they don't pay for roads, parking or congestion charges.
Sure, take away the fuel "subsidy" (the main aim of the guardian article). Hope you don't mind the cost of bread going up by a factor of ten. Hope you don't mind being reduced to only eating seasonal food. Hope you don't mind air travel being reserved for the uber-rich.
I never considered VAT at 5% for gas and electric supplies as a subsidy for fossil fuel industry, more like a subsidy for people being able to heat their houses! In fact on electric its not discriminating against any particular supply so you could call this ANOTHER subsidy for wind farms as well.
"together have benefited from an estimated $4.9bn in government support, according to the data compiled."
Government support or government subsidies or government contracts?
Yes, clearly Solar City and Tesla benefit from various go-green rebates for their customers. SpaceX on the other hand I thought was largely funded by it's contracts.
A contract that happens to be from a government arm (whether that be the Air Force, CIA or NASA) is hardly a "subsidy". It's a contract to provide a service. You can argue whether the taxpayer should be spending money on whatever that thing is, but it's not a subsidy - it's not allowing the company to operate at a loss and still balance their books (no more so than a military supplier carrying certain IP over into civilian products).
Moreover, when we consider the amounts by which he is undercutting the lumbering incumbents, it does indeed look to be a bargain.
As far as Tesla goes, their 200,000 vehicle limit will dry up, but if all goes to plan, Musk's Gigafactory will be producing cheap batteries by then, allowing him to drop the price of his products (both cars and powerwalls) by not inconsiderable amounts, so he is at least trying to play the short-term subsidy game - get it whilst it's hot and use it to bankroll longer-term prospects.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
