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Elon Musk Continues to Stretch Out His Hand

Elon Musk Continues to Stretch Out His Hand
(Jerry Lampen/Getty Images)

By    |   Thursday, 08 August 2019 12:05 PM

In his book “Zero to One,” entrepreneur Peter Thiel writes about his friend Elon Musk. The men worked together decades ago and were central to the creation of PayPal, a game-changing company that made it safe and easy to pay for things on the internet.

What’s Musk up to these days? Thiel writes that: “In January 2010 — about a year and a half before Solyndra imploded under the Obama administration and politicized the subsidy question — Tesla secured a $465 billion loan from the U.S. Department of Energy. A half-billion-dollar subsidy was unthinkable in the mid-2000s. It’s unthinkable today.”

Talk about praising with faint damns.

Theil is trying to pay Musk a compliment; his friend was “smart” enough to grab a government handout while the grabbing was good. But there’s a world of difference between creating value (as the men did by forming PayPal) and collecting government subsidies (as Musk so often does today).

Unfortunately, Musk’s tenure as a corporate welfare king didn’t end with that big payday.

“From subsidies at the national and state level, to federal tax credits for consumers buying electric cars and solar panels, to fuel efficiency standards that help bring millions in revenue for Tesla and vital government contracts for SpaceX (won in a competitive bidding process), his major companies have gotten significant government support in different forms,” CNBC wrote of Musk last year.

Let’s look at Tesla, Musk’s company that makes electric-powered cars. It pockets three types of government subsidies: credits for manufacturing zero-emission vehicles (ZEVs), credits for manufacturing non-ZEV, and U.S. federal income tax credits of up to $7,500 per car.

Looking at just a single quarter from last year, the SEC reports that, “ZEV credits sales were $52.3 million and non-ZEV regulatory credits sales were $137.2 million in the three months ended September 30, 2018.” That’s $189 million of subsidies in just three months.

Then there’s the $7,500 federal tax credit. As TheStreet.com explains, “The money is paid to the buyer of the car -- not the seller, Tesla. But that’s just semantics as far as Tesla’s actual economics are concerned. The car becomes $7,500 less expensive to buy, benefiting Tesla just as much as if Tesla itself had received the $7,500 benefit from the U.S. government.” The federal government handed out more than $524 billion in such tax credits to Tesla buyers in that quarter. Looks as if Thiel was wrong about that “half-billion dollar subsidy.” It’s still thinkable, and it’s still flowing to Elon Musk.

Other governments are pitching in.

In return for placing a battery plant in Nevada, Musk negotiated with the state to provide “exemptions from sales-and-use, property and general business taxes for 10 to 20 years, adding up to an estimated and unprecedented $1.4 billion,” as London’s Guardian newspaper reported. In a story reported from Sparks, Nevada (where the city manager says he’s seen zero gain from the Tesla tax handouts), the newspaper added that “Tax credits given to Tesla – and to a lesser extent other tech companies – deplete public services, resulting in potholed roads, overcrowded schools and insufficient affordable housing.”

Even Texas is in the business of handing Musk money. “SpaceX, Musk’s rocket company, cut a deal for about $20 million in economic development subsidies from Texas to construct a launch facility there,” the L.A. Times writes. That newspaper adds that SpaceX relies on “more than $5.5 billion in government contracts from NASA and the U.S. Air Force” to keep it going.

Musk should run his enterprises out of his own compensation. The New York Times reported that Tesla paid Musk “nearly $2.3 billion last year, largely in the form of stock options. The next-highest CEO on the list, Discovery’s David M. Zaslav, made $129 million.”

It’s clear that Musk aims to keep Tesla’s stock price up by collecting as much in subsidies as possible. After all, while car owners may miss payments, Uncle Sam never fails to pay its bills. But it’s not clear why local, state and federal taxpayers should keep paying. Elon Musk has mastered life on the dole. Instead, he should earn his own way in the world.

Christian Josi is a veteran of international center-right/libertarian politics, and a frequent columnist for a variety of publications. He is the Founder and Managing Director of C. Josi & Company, a global communications resource firm based in Virginia Beach and Washington.

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Elon Musk has mastered life on the dole. Instead, he should earn his own way in the world.
elon musk, hand, tesla
Thursday, 08 August 2019 12:05 PM
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