back to article 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 …

  1. GettinSadda

    Red-in-Tooth-and-Claw?

    "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"?

    1. Michael H.F. Wilkinson Silver badge

      Re: Red-in-Tooth-and-Claw?

      Or indeed that being a "red-in-tooth-and-claw capitalist" is a good thing per se?

    2. David Kelly 2

      Re: Red-in-Tooth-and-Claw?

      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.

      1. Deebster

        Re: Red-in-Tooth-and-Claw?

        What makes you say "The Left" has a problem with Musk? Working towards the death of the petrol car isn't exactly something that's going to invoke Godwin's law from them.

      2. Michael Wojcik Silver badge

        Re: Red-in-Tooth-and-Claw?

        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.

      3. Anonymous Coward
        Anonymous Coward

        Re: Red-in-Tooth-and-Claw?

        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?

  2. Mark Solaris

    Seems legit

    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.

    1. Joe User
      Meh

      Re: Seems legit

      Yes, but the question is this: should the Government be taking money from us relatively poor people (i.e., common taxpayers) and giving it to rich people to prop up their ventures, especially when the recipients have plenty of money to pay for their own playthings?

      1. Justin S.

        Re: Seems legit

        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

        1. DougS Silver badge

          Re: Seems legit

          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.

          1. Eric Olson

            Re: Seems legit @DougS

            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.

        2. Joe User

          Re: Seems legit

          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).

          1. Anonymous Coward
            Anonymous Coward

            Re: Seems legit

            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.

        3. td97402

          Re: Seems legit

          Quite a well written treatise on personal income tax but I wonder if it is really on point. Billionaires tend not to get paychecks. I'd say that everyone subject to income tax withholding from their paycheck is a common taxpayer.

      2. Brent Beach

        Re: Seems legit

        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.

  3. Voland's right hand Silver badge

    At least he has delivered something tangible

    Well, he has delivered something tangible.

    That makes a welcome difference compared to other companies which rely heavily on the "find the subsidy" model such as Leprechaun Air, etc.

    1. elDog Silver badge

      Re: At least he has delivered something tangible

      Or, of course the huge industries built around sucking at the military/intelligence teats.

      "Well, we did accomplish something with all of your fine taxpayers money. We just can't tell you what we did."

      1. Flocke Kroes Silver badge

        They can tell us what they did

        They made enemies.

  4. PghMike

    how capitalism is supposed to work??

    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.

    1. Steve Crook

      Re: how capitalism is supposed to work??

      "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.

      1. PghMike

        Re: how capitalism is supposed to work??

        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.

    2. Anonymous Coward
      Anonymous Coward

      Re: how capitalism is supposed to work??@ PghMike

      "The author seems remarkably clueless about the role of government in capitalism"

      You must be new round here. Don't feel obliged to stay.

      1. Doctor Syntax Silver badge

        Re: how capitalism is supposed to work??@ PghMike

        "You must be new round here."

        That's what I thought. Remarkably, he isn't.

    3. Tim Brummer

      Re: how capitalism is supposed to work??

      100 years ago in the USA there were no income taxes, no subsidies, and no federal regulations. That is how capitalism is supposed to work.

      1. Tom 13

        Re: 100 years ago in the USA there were no income taxes

        No, but we still had government granting monopolies or subsidies to projects they wanted completed. Roads, canals, and railroads are some of the early examples.

      2. td97402

        Re: how capitalism is supposed to work??

        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.

  5. Flocke Kroes Silver badge

    Comparing with a 'competitive' project

    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.

    1. Pen-y-gors Silver badge

      Re: Comparing with a 'competitive' project

      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.

      1. Anonymous Coward
        Anonymous Coward

        Re: Comparing with a 'competitive' project@ Pen-y-gors

        "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.

        1. Naselus

          Re: Comparing with a 'competitive' project@ Pen-y-gors

          "So, come again, "Tories give to their chums"? Surely you mean "Labour gave to their chums"?"

          Wait... you mean you still differentiate between the red Tories and the Blue tories?

        2. Tom 13

          @Ledswinger

          Yep. He was headed toward an up vote until he threw that turd in.

      2. LucreLout Silver badge

        Re: Comparing with a 'competitive' project

        what they would cost when done by a competent government department

        Unicorns can fly too, but since neither thing actually exists, aren't much good to anyone.

      3. Adrian Tawse

        Re: Comparing with a 'competitive' project

        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.

      4. Steve Crook

        Re: Comparing with a 'competitive' project

        "This situation should be compared to the private finance deals that the Tories give to their chums"

        PFI: Invented by Tories and stretched to close to breaking point by Nu-Labour.

      5. SEDT

        Re: Comparing with a 'competitive' project

        competent government department

        ROFL. I love an oxymoron

    2. Stuart Castle

      Re: Comparing with a 'competitive' project

      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.

      1. JP19

        Re: Comparing with a 'competitive' project

        "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'.

        1. Anonymous Coward
          Anonymous Coward

          Re: Comparing with a 'competitive' project

          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.

        2. SEDT

          Re: Comparing with a 'competitive' project

          I spent a very enjoyable Sunday last weekend experiencing a couple of Tesla cars, and

          unlike a one off project car, his efforts are showing the way ahead

      2. SundogUK

        Re: Comparing with a 'competitive' project

        (assuming they are charged by electricity from a renewable source)

        Ha ha ha! Ha ha ha ha ha!!!

      3. Doctor Syntax Silver badge

        Re: Comparing with a 'competitive' project

        "assuming they are charged by electricity from a renewable source"

        Aye, there's the rub!

  6. John Smith 19 Gold badge
    Happy

    Hmmm.

    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.

    1. Tom 13

      Re: Hmmm.

      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.

  7. Arisia

    Bargain

    Seems a bargain compared to the fossil fuel industry

    http://www.bbc.co.uk/news/business-27142377

    1. JP19

      Re: Bargain

      "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.

      1. Arisia

        Re: Bargain

        "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!

      2. Charles Manning

        Made up fuel subsidies.

        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.

    2. BoldMan

      Re: Bargain

      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.

  8. rh587

    "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.

    1. Brad Ackerman
      Black Helicopters

      A contract can be a subsidy, depending on how it was awarded. Nationality restrictions can be justified for the SpaceX launch contracts (classified payloads), but nationality restrictions on rail cars would fall into the "subsidy" camp.

    2. Yag

      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.

      He's playing this game the way it's intended to be played. How strange!

  9. Buzzword

    Consumer subsidy per car

    Does the $7,500 tax credit really matter for Elon's fortunes? The first car, the Tesla Roadster, had a list price of $109,000. How many prospective buyers were persuaded by the government's 6.8% discount?

    1. Anonymous Coward
      Anonymous Coward

      Re: Consumer subsidy per car

      "How many prospective buyers were persuaded by the government's 6.8% discount?"

      In which case why did the idiots of government give the money away? Don't forget that depending on markets there's other subsidies to EV drivers that equate to a subsidy to the maker, like their frequent exemption from road taxes and fuel and sales taxes.

      Here in the UK there's been a £5k cash subsidy, exemption from road taxes (c£400 a year for a car of this class), no fuel duty (£2.60 a gallon, say £1,500 a year for a car of that class), and sales tax on fuel used at quarter the rate (VAT on electricity is 5%, on fuel is 20% - say £400 a year), and exemption from the new car tax (say another one off £400). If you live in a city with congestion charging, EV's are often exempt - if commuting into London that could be worth around £2,500 a year.

      Ignore the congestion charge, and over ten years that means the UK taxpayer would be giving a subsidy of £28,000 to people able and willing to buy an £85,000 car. That sort of subsidy certainly does help Musk sell Teslas.

      1. Thecowking

        Re: Consumer subsidy per car

        I wanted a Tesla before this, but you've just made me _really_ want the Tesla 3 when it comes out. You're saying I'd save its price over about 7 years in various savings.

        The subsidies work, I've got the incentive to switch to a Tesla 3 :) Just hope they roll out more super chargers around the UK

      2. Charles Manning

        Re: Consumer subsidy per car

        "In which case why did the idiots of government give the money away? "

        Because those sorts of policy attract votes from some voters.

        Governments respond to the feedback from voters, not from what makes best sense.

        Everyone knows the USA is heading towards deep financial shit (and UK is worse, and some others worse still). Everyone knows that borrowing more and leaving more debt is a bad idea. But nobody would vote to tighten their own belts.

        Politicians that do the right thing don't get voted in.

        1. Jimbo in Thailand

          Re: Consumer subsidy per car

          "Governments respond to the feedback from voters..."

          OMG that's a cruel joke... on us! Let's face it, the reality, as recently mentioned in a comment here at the Reg and often repeated after Mr. Edward Snowden's shocking revelations back in 2013 is this: "NSA - The only branch of the US government that actually listens to its citizens."

          Sadly, there might have been a tiny bit of voter influence on our bought-and-paid-for corporate stooges in DC prior to 2010, but that concept went to the tar pits thanks to the traitorous Supreme Court's heinous Citizens United ruling that same year. And once more... the corrupt black-robed idiots comprising the SUPREME COURT... the HIGHEST court in the former Land of the Free... they're all POLITICAL APPOINTEES. What could possibly go wrong? Oh wait!

      3. Anonymous Coward
        Anonymous Coward

        Re: Consumer subsidy per car

        There's the rub. The aim of the electric vehicle subsidies is to encourage investment in electric vehicles, with the assumption that without the subsidies it's a lot harder to replace the incumbent, undesirable technology. Realistically, it's in place to encourage purchase at prices where the money matters, but in terms of outcome, it doesn't matter _that_ much since it selling cells. In fact, you could argue that the value of each Tesla sales is greater because it sells more capacity per car.

        However, it should be noted that for _many_ Tesla Model S buyers, the Model S is by far the most expensive car they've bought and for them the $7.5k tax credit makes a large difference.

        PS Maybe this article was just Tim experimenting with the Musk/Tesla headline to see how many more eyeballs it would attract than his normal pieces.

        Tim's suggestion of teat-sucking is a fair point given that all of the industries they're working in have large subsidies, but while the article recognizes that government is subsidizing in what it considers to be the public interest, it basically says that it's wasteful (because dogma), rather than actually analysing the companies to decide whether they've provided value for money.

    2. Where not exists

      Re: Consumer subsidy per car

      Simply stated, the well off are financially positioned to take advantage of the $7500 rebate, so they do.

  10. Anonymous Coward
    Anonymous Coward

    But wait...

    Not to forget the patents he released allowing anyone to ultilise the work they've done and allowing a massive change in the future development of electrical vehicles.

    That there is a lot of value just given to society.

    Subsidies are swings and roundabouts.

  11. Eric Olson

    A little perspective..

    Back in 2012, in the wake of the corporate bailouts, the companies pitting one city or state against another, etc., the New York Times put together a database and series of reports on such tax breaks, credits, and incentives. While $4.9 billion sounds like a lot, it's over the lifetime of the various companies, which according to the LA Times article, dates back to at least 2006 in SolarCity's case.

    What the NY Times found was that in 2012, around $80 billion in such subsidies were happening each year. Texas alone accounted for $19.1 billion, and states like California, Michigan, New York, and Pennsylvania were all around the $4 billion per year mark. The database is here (full link: http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.htm)

    Of course, one could take issue with some of the assumptions in the LA Times article, such as including around $1 billion in the total for subsidies that were paid to customers who had a solar installation from SolarCity, rather than just the $500 million that SolarCity directly received for their own solar panel installations. But you could also argue that without such a subsidy, SolarCity would have never made the sales. Since we don't have a clone of the Earth with just that one difference, it's hard to say for certain.

    Sad to say but receiving around $600 million a year in various subsidies, tax breaks, credits, and the like is not only par for the course, but a guiding principle of our so-called small government political party. Corporate welfare, as it's derisively described, is much more politically palatable to Republicans as they rename it job creation and talk about how great private enterprise is. I'm not a big fan only in that it represents a race-to-the-bottom as states try to one-up the next by enticing companies to expand or relocate through the use of property tax exemptions, sales tax exemptions, or other things that will last a decade or more, might get extended if the company makes noise about leaving or shutting down, and generally greatly underestimates the impact to a state's tax base and overstates the benefits of having that HQ or new factory.

    Nothing to see here. Just move along.

    1. John Smith 19 Gold badge
      Unhappy

      Re: A little perspective..

      Link does not work.

      But a nice post.

      1. Eric Olson

        Re: A little perspective..

        *sigh* I dropped the "l" at the end of the URL.

        Here's the working link: http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html

    2. Anonymous Coward
      Anonymous Coward

      Re: corporate bailouts etc

      Or, in summary:

      Calling today's USA a capitalist country is silly. It's corporatist not capitalist, and has been for a number of years.

      Same goes for the UK too. Maybe not so much the rest of Europe, not yet anyway.

      Longer version:

      http://www.economicpolicyjournal.com/2009/11/explaining-difference-between.html

    3. Weapon

      Re: A little perspective..

      Actually even more than that, the subsidies they are counting for Musk are not just subsidies of the past but also subsidies of the future. The Nevada deal for example is based on 20 years of subsidies that assume Tesla buys 10 billion worth of equipment over this time.

  12. Phil O'Sophical Silver badge

    How well are those companies going to keep doing after the subsidy flood dries up?

    And what about the indirect subsidies? Fill your electric car from the grid and, for the moment, you pay no fuel duty. Drive it into London and you pay no congestion charge, despite your Tesla taking up more space than a Fiesta, and don't forget the free parking at charging points.

    Sooner or later Government will cotton on to these "tax avoidance" schemes, and move the goalposts. How will Musk & co. adjust to that?

    1. Eric Olson

      Re: How well are those companies going to keep doing after the subsidy flood dries up?

      No, they won't "cotton on." This is SOP and some of these subsidies, credits, or incentives have been around for decades. It's not just the solar industry. Grimy, unsexy factories frequently get this treatment, as they provide jobs, and that's manna from the gods for politicians who are at a loss as to how to actually do anything besides campaign for their next term.

      Texas alone gives away or forgoes around $20 billion in taxes each year, mostly through exempting a company from sales and property taxes, or refunding any sales taxes paid in a year. So while the EV credit might disappear after a while, assuming the 200K vehicle limit isn't increased, the Gigafactory tax exemption is slated to continue for a decade or more, by which point Tesla could be building more factories in other states, getting bigger and better exemptions.

      This is just the way the country is run.

  13. Anonymous Coward
    Anonymous Coward

    You left out the important parts

    How much does he donate to PAC's? Who do the PACS's donate too? How much does he bundle to politicians? I will give him this, unlike Solyndra he seems to actually making a product that sells.

    PAC. Political Action Committee

  14. Anonymous Coward
    FAIL

    Yeaaah!!

    "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."

    Like bailing out banks!! Compared to Elon, the guys at Goldman Sachs are SAINTS, SAINTS I TELL YA!

  15. Anonymous Coward
    Anonymous Coward

    There's plenty to question in the subsidies

    but I wouldn't rely on the regulars at the Dog and Duck as the benchmark of coherent politcal analysis

    1. Naselus

      Re: There's plenty to question in the subsidies

      The regulars at the Dog and Duck are UKIP's central policy committee, so Tim's been agreeing with their cogent analysis for years...

  16. Bob Dole (tm)
    Facepalm

    Article is odd

    Are you suggesting that a government subsidy shouldn't be taken advantage of?

    I find articles like these to be really weird. In a True(tm) capitalist economy the government wouldn't subsidize anything and all taxes would be applied equally. Obviously, for better or worse, such a beast doesn't exist.

    Instead, we get various groups deciding that we need more corn products, or we need to lower wheat production or we need space ships, or a particular city/state really really wants that large employer to move in.

    This type of market manipulation happens regardless of the type of economy. The part I don't understand is when the desired behavior occurs we get various people (like the author) complaining about those that actually make it happen.

    Honestly, regardless of your political leanings, Elon Musk should be held up as a hero of the people. He is not only dancing to the tune of whoever is in governmental power but he's also delivering on the spirit of their desired behavior. If you don't like what he's doing then petition your government to stop subsidizing that behavior.

    But, maybe that's the problem. He's certainly made quite a few enemies from established power bases in the aerospace and automotive industries. This leads me to the following question: who is subsidizing your article? Or are you just one of those people that hates seeing others succeed?

    1. Anonymous Coward
      Anonymous Coward

      Re: Article is odd

      "Elon Musk should be held up as a hero of the people. He is not only dancing to the tune of whoever is in governmental power but he's also delivering on the spirit of their desired behavior."

      This is the new heroism? Being a good dancer-servant to the arrogant know-nothing self-promoters who comprise the political elite?

      Who subsidized Worstall's article? Answer: The Regsiter.

    2. Charles Manning

      If one business is getting a subsidy, then it just means some other business is paying more tax.

      Doing it as "tax" just legitimises what would otherwise be illegal - taking someone else's stuff.

      If I take a $1000 tax break then my neighbour - a baker - must pay $1000 more tax.The nett effect is the same as me going over to his place with a few tough mates and taking his $1000 bike by force.

      The only real difference is that the "transaction" is sanitised by having the state apply the force.

      Those subsidies might make some darling industries more economically viable, but they make other businesses less viable. Musk's flash company makes billions, Joe's Bakery goes bust.

      Legal or not, there is still a level of morality to taking subsidies.

      1. GreenJimll

        Sure that only works if you and your neighbour are the only tax payers in your country? Otherwise your $1000 tax break is spread out over the other millions of tax payers.

    3. Tom 13

      Re: The part I don't understand

      Because you assume that government chose correctly when it chose to pursue that goal (for whatever your value of "correctly" is). But that's not merely a questionable statement, it is objectively false. The fundamental problem of economic theory is that no model can actually replicate real live market choices. Economists at least are attempting to model it, politicians not at all.

      Yes, I will celebrate Musk because he is delivering (at least on SpaceX, Tesla and batteries are still unproven). Maybe he would be delivering without the subsidies, maybe not. That doesn't mean we should criticize that he is getting subsidies. My caveat is that I won't blame Musk, instead I'll blame the politicians.

  17. Anonymous Coward
    Anonymous Coward

    > Playing off tax jurisdictions in order to gain maximum tax benefits is an obvious strategy, but the value of it to the country as a whole is less obvious.

    That's really a bit hypocritical Tim. Elsewhere, that's called "competition" and is supposed to be the main driving force behind the need to be efficient.

    1. Tim Worstal

      Quite true and I can be found arguing that point in that manner at times.

      But demanding consistency is a bit much isn't it?

  18. Mage Silver badge
    Flame

    I totally object to UK & Ireland Electric Car Policy

    Only rich people can afford them.

    Yet!

    1) Subsidy buying it

    2) No road tax

    3) No fuel Tax

    Benefits rich folk and folks like Musk.

    1. Julian_Cox

      Re: You totally object to UK & Ireland Electric Car Policy

      "Only rich people can afford them" Initially.

      The same was true of horses hundreds of years ago, then cars in general a hundred years ago.

      Give it a while and you will notice that here in the 21st century, only rich people can afford to pay extra to fill up a gasoline vehicle, and the only purpose of them is nostalgic races - like a horse race is today.

    2. Weapon

      Re: I totally object to UK & Ireland Electric Car Policy

      Everyone benefits from fresh air. Unfortunately those polluting that air are not paying their fair share and we all have to pay for the health impacts. Which is far more than road taxes or fuel taxes.

  19. Haefen

    Subsidies never go away because some of the subsidy is funneled back into the system to ensure more subsidies. Of course they can be replaced and often are when the public demands the most obvious waste or corruption end. Unfortunately changing the name does not change the game, we still pay and pay.

  20. Henry Wertz 1 Gold badge

    Smug

    "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."

    I can blame him, because at the same time he's getting these huge sacks of cash, he's (several times over the years) smugly commented how he has not gotten any bailout money like GM did. Well, yeah, no "bailout" money, just billions of other dollars.

  21. Anonymous Coward
    Anonymous Coward

    "Subsidies" are not tax breaks

    tax breaks are tax breaks. Subsidies are cash GIVEN.

    Musk's outfits get both. while enjoying all the infrastructure and protection all other American industries enjoy.

    It's all "corporate welfare" or it's not. There is no "tax breaks for one company are bad while tax breaks and cash handed over are good" for another.

    Did this take into account the money made by selling "EV Credits" that the State CARB creates out of nothing and GIVES Tesla and Tesla then turns into cash?

    1. Anonymous Coward
      Anonymous Coward

      Re: "Subsidies" are not tax breaks

      ZEV credits, not "EV credits". The categories don't really say anything about "electric".

      Rather than thin air, CARB creates the credits out of dirty air. And they adjusted the rules to make things worse for Tesla, because Tesla pays lip service to the swapping rules to get credits, because CARB insists on fast refuelling (which they made slower because current hydrogen filling stations can't go fast enough). CARBs stupid idea is to give some refueling credits based on how much refueling cars are doing rather than recognizing that if you have a plug-in you can charge at home you need to do a lot less refueling on the road, particularly when your car has 150 to 300 miles of range.

  22. MonkeyCee Silver badge

    Not sure what the point is of the article

    Are there ANY industries that are legal, and function according to proper red-in-tooth-and-claw capitalism? I thought that most experienced some level of cronyism, subsidy, tax break, barrier to entry or outright corruption. It's pretty much the nature of the beast.

    It's the same way that "free market" is an oxymoron. A market, by definition, has to have some rules, and some method of enforcing them. Thus any market has some limit to it's freedom, even if it is as simple as unequal distribution of information, or unequal access. I do understand that generally "free markets" mean "fair and free as possible" but then it quickly gets bogged down in the argument over what should be regulated and how. Much like "small government" sounds good, but often means "apart from the bits I like".

    While 5 billion over 9 years can sound like a lot in subsidies, there are plenty of posters pointing out how much actually is thrown around by various countries/states, so it can be seen as pretty small potatoes considering Musk has actually delivered many of his products, and in a somewhat timely manner. Contrast this with say defense procurement (even during a prolonged war/imperialist conquest), the nuclear power industry, the airlines, and the whole electric grid deal.

    Whilst solar power is not a generation tech (well, PV ain't) it is a very effective reduction in consumption when your big power use is cooling. So you get more power at the times you need it most. Not so good for the UK, but chunks of USA it's just grand. Same way heat pumps and geothermal aren't going to stop your power needs, they do make things more efficient. I like nuclear and hydro power generation, but neither of those would be at all feasible without government funding/support/control. Since when they do fuck up they kill an awful lot of people. Well, hydro does, jury is still out on nukes. Hydro is at least profitable when you count all the externalities, we can't cost the externalities of nukes until we've got the ability to consume high grade waste, which is _hopefully_ going to be possible in thorium salt reactors. But those are a few years away from being scaled up, and will again probably need some sort of government pork to be able to become suitable for grid level production.

    Education, emergency services, transport infrastructure and armed forces are generally accepted as being important, and usually best run by the state, with various sub sections handled by private interests.

  23. ToMarsAndBeyond

    Please inform yourselves when and how and why Elon Musk started and financed his companies

    Because then you will find out that incentives or tax brakes or any money did not play any role into founding or financing the companies of Elon Musk. He earned his millions without any tax money and put all he earned with PayPal to invest in Tesla and SpaceX. Only after these companies were founded and Elon had put ALL his money into these companies, the companies have received the same tax breaks any company can apply for. And please inform yourself how much jobs the companies created and how much value it added to the state of Nevada (Moody's rating)

  24. E 2
    FAIL

    "There's three major points here."

    Or rather: "There is three major points here.".

    Indeed. Is the author a citizen of the U.S.A.?

    Editors: where are the Register's grammar police?

    1. Tim Worstal

      This is one that I always do get wrong. Apologies.

  25. Mark Solaris

    Not my money but...

    I'm rather "bugger the cost, just do it" when it's Good Things* that are being invested in. Cheap rockets, electric cars, fiber to the premises, electrical storage and peak load reduction; they are all part of the solution and a hell of a lot smarter to subsidize than mining company fuel bills or oil sands exploration.

    *I'm more than happy to decide for everyone when it's a Good Thing or not :)

  26. PoliTecs

    Proof that alternative energy is a failure and based on a lie!

    http://politecs.com/?p=146

  27. Julian_Cox

    Probably A Good Idea.....

    The concept of subsidies and tax breaks seriously upsets a group that wishes for economies to stagnate into existing monopolies like fossil fuels and internal combustion engines. Of course the same crowd is perfectly happy with all the perks, tax breaks and wars fought for those industries to carry on business as usual.

    Personally I think Musk has done enough to prove that he was correct in the direction to take a post fossil fuel and internal combustion engine economy and I would be only too glad if every major government on earth wrote him a cheque to clone his factories everywhere immediately without him having to battle through a mire of outdated politics and vested interests to get there.

    The guy is well on his way to deliver an affordable (average priced) car that is better than a decent gasoline sedan and can be refuelled for $10 of renewable electricity. If you aren't in the business of selling fossil fuels and internal combustion engines then fighting him to preserve polluting transport that costs 5 or 10 times and more to fill up is absolutely ridiculously opposed to the best interests of everyone else on planet earth - including the kids of those selling fossil fuels and engines.

  28. Weapon

    Most of these subsidies are not subsidies available to startups but subsidies available to all new businesses that come to a state. The largest subsidy here is the one from Nevada which is tax breaks on property tax and sales tax. This is available to pretty much any new business coming to Nevada:

    http://www.diversifynevada.com/programs-resources/incentives

    Fact of the matter these subsidies are a norm for all businesses these days, just look at Boeing who secured 8.7 billion subsidies just in 1 deal.

  29. Tom 13

    Re: this isn't quite how red-in-tooth-and-claw capitalism

    True, but we haven't had that in these parts since at least FDR and probably since Woodrow Wilson.

    Taking that into account, the direct subsidies he is receiving (while technically it is true that he benefits from the indirect ones, so potentially would any competitors so I do not count those), he's still a hell of a lot cheaper than the direct payments government has been making for the last 30 years to his competitors and he seems to be making real technical progress whereas they just seem to be interested the next trough feeding. So while it's not perfect, I'll take it.

  30. GreenJimll

    The author seems to be subtly implying that the $4.9bn in "government support" is "tax breaks". I wonder how much of it is actually government spending (ie the US Government wanting something and then paying one of Musk's companies to provide it)? If that sort of spending is included in "government support" then there's a fairly hefty chunk of NASA funding that is nothing to do with "tax breaks". Its money spent for providing services for the commercial cargo flights SpaceX provide to the ISS (one of two US commercial providers, although the only one flying at the moment) and development of US manned spaceflight back to Low Earth Orbit (a facility the US lost when it retired the shuttle and again not the only company funded). In these cases SpaceX are proving to be considerably cheap than the alternatives, so its actually saving the US taxpayers' money.

  31. svenelven

    Cheap if you ask anyone with a brain

    U.S. fossil fuel subsidies stand at average $37.5 billion annually and this set of companies getting $4.9 billion over their existence? I am not sure but it seems like it is money well spent and cheaper than what we are currently spending for those companies to make money had over fist...

  32. aelfheld

    Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!

    "[...] such subsidies aren't going to last forever."

    You underestimate the idiocy of governments. The U.S. still subsidises mohair.

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