Tax credit ≠ subsidy

[Swampgator]

I am getting a little tired of columnists and commentators stating that Tesla is subsidized because of tax credits.
Tax credits simply allow you to keep more of the money that YOU earned. No-one pays me $7500 that was taken from somewhere else. Positing that because I paid 7500 less to the IRS in a given year is somehow taking money away from the government, implies that all of my money belongs to the government and that they ALLOW me to keep some of it.

If the government threatens to take less of my money if I agree to buy a Tesla why shouldn't I take that deal?

 

[JeffK]

Depends on your definition of subsidy... A tax credit is often called an "indirect subsidy".

They like to pretend they're doing us a huge favor in letting us keep money we earned... but that's another rant.

Subsidy - Wikipedia, the free encyclopedia

Even a "low interest loan" is on there.

 

[Swampgator]

Jeff, I hear you, but words do have meanings, until they become co-opted.
Here is the dictionary definition of the word:

 

[cpa]

This is just sloppy and biased reporting. The subsidy goes to the buyer. Does Tesla benefit? Indirectly, sure. Tesla made sales to people who might not have bought a Tesla because these buyers bought a Tesla instead of a BMW. Or, like in our case, we purchased about $6,000 of options that we wanted.

The government subsidizes a host of things, yet we rarely see journalists writing critical pieces on them. We taxpayers are subsidized for procreating (child tax credit and the additional child tax credit); low income workers with dependents (Earned Income Tax Credit); higher education; installing PV panels or windmills; 100% write-off of business assets in the year of acquisition instead of depreciation; mortgage interest deduction; retirement contribution credit and others. Some of the credits like the EITC and additional child tax credit are refundable. Are they available to all taxpayers? Sometimes yes, sometimes no.

Whenever a government gives money or goods and services away, there will always be a subset of the population that screams, "unfair!" It is just human nature. Good journalism tries to be even-handed and present all sides of the arguments.

 

[Trips]

They do benefit from the Zero Emission Vehicle (ZEV) credits that they sell to other car companies. From 2012-14 they made $295 million from them and looks like $118 million last year. This money is coming directly from other automakers because they are not making clean vehicles. You can call this what you want.

The Gigafactory is also getting huge tax breaks/credits but that is standard for any company that is moving to a new state and creating jobs.

 

[182RG]

No-one pays me $7500 that was taken from somewhere else.

It's an indirect subsidy. There are people, especially Model 3 reservation holders, for whom the $7500 is a buy/no buy factor, or at least a big psychological purchase influencer. Tesla indirectly benefits from increased sales for this reason.

The US government is in the business of spending our tax dollars. In a deficit spending environment, they spend every dollar they take in, and "borrow" to make up deficit. $7500 less from you, is $7500 more that they "borrow". We, the people, pay for the cost of that "borrowing".

There are 2 sides to economic theory.

 

[Mr So Chill]

Why isn't any other Hybrid or EV maker being discussed? No one is going after Nissan or Porsche with a pitchfork.

 

[182RG]

Why isn't any other Hybrid or EV maker being discussed? No one is going after Nissan or Porsche with a pitchfork.

Their CEOs aren't on Twitter, pumping up the volume. Seriously, if you want attention and press, you get the good with the bad......

 

[EaglesPDX]

Tax credits are subsidies, someone else has to pay that $7,500.

In the case of EV's the tax credit is based on doing good things in public interest in ways the government could not do directly, get people to buy EV's.

The public interest in the EV subsidy are many.
1. Eliminate oil imports $400B a year.
2. Elminate oil import national security costs $500B in oil wars and terrorism per year.
3. Eliminate greenhouse gas emissions, assume $300B a year and rising.
4. Build US jobs and industry in 21st century tech.

 

[jelloslug]

Tax credits are subsidies, someone else has to pay that $7,500.

You are incorrect. It's MY $7500 and I earned it. I have every right to get to try and keep it. No one else "has to pay it" because it did not exist as tax revenue to begin with.

 

[cronosx]

You are incorrect. It's MY $7500 and I earned it. I have every right to get to try and keep it. No one else "has to pay it" because it did not exist as tax revenue to begin with.

not really.. it's a tax you don't pay, and of course the state need the money, so if you don't pay it, someone else will do it, or you'll do it in another form ( like VAT or similar )

 

[jelloslug]

not really.. it's a tax you don't pay, and of course the state need the money, so if you don't pay it, someone else will do it, or you'll do it in another form ( like VAT or similar )

Nope. If state does not get the revenue then they don't spend the money. Tax revenue cannot be counted until it's officially collected.

 

[182RG]

Nope. If state does not get the revenue then they don't spend the money. Tax revenue cannot be counted until it's officially collected.

@cronosx is from Italy. His definition of State = Federal for us.

 

[Skotty]

People who use the word subsidy negatively equate it to getting government hand outs. In that context, a tax credit is not a subsidy, and the ZEV credits most certainly are not (those are just businesses doing business; no one has to sell them, no one has to buy them). If you use the term subsidy in a more general sense, then it's basically meaningless, because then we are all getting subsidies for all kinds of things; anything and everything that might reduce your tax liability is a subsidy. Shame on everyone!

 

[Vitold]

You are incorrect. It's MY $7500 and I earned it. I have every right to get to try and keep it. No one else "has to pay it" because it did not exist as tax revenue to begin with.

Would you feel differently if your government took your 7500 (as it does to everyone) and than pay you 7500 for purchasing a green car?

 

[Lloyd]

When the government gives oil companies billions of $ in tax breaks on oil leases, equipment etc., that others do not get is that a subsidy? Of course it is......

 

[EaglesPDX]

You are incorrect. It's MY $7500 and I earned it. I have every right to get to try and keep it. No one else "has to pay it" because it did not exist as tax revenue to begin with.

It is a credit against taxes owed under current tax laws so providing that credit to us requires that someone else put up an additional $7,500.

Is this use of tax dollars a good use of tax dollars is the only question and it certainly is in the best interest of every American that US reduce oil imports, reduce military spending, reduce national security threat of oil imports, reduce oil terrorism, reduce greenhouse gas emissions, build US 21st century high tech mfg. economy, build transportation system based on sustainable energy.

 

[Swampgator]

I thought the folks on this forum were a little smarter than this.

 

[yesup]

This type of semantic argument is meaningless.

You can call it a credit, an incentive, a subsidy, a bonus, a rebate ..... Doesn't really matter.
At the end of the day (... or year?), when comparing with buying an ICE car of the same price, your bank account has an extra $7,500, and the government has $7,500 less. You can call it whatever you want to call it; so I don't see what is there to argue about.

 

[Chopr147]

Call it what you want but I at least get some of my tax money back. I feel I pay more than my fair share in order for others to just collect w/o working. But getting into a tax rant will just fire me up I put solar panels on my house in 2011 with great tax credits. A $45,000 system cost me $15,000 Let the hate begin