American Energy Alliance

GM and Tesla: Pay No Taxes, Take More Handouts

For at least a year now we have heard complaints from GM and Tesla about the need to extend the electric vehicle (EV) tax credit, with just these two companies upset that their gravy train is coming to an end. These companies insist that it is crucial that the EV tax credit be expanded and extended, and have convinced a few members of Congress to introduce a bill to do just that. One could pass it off as just your standard rent-seeking of the sort that goes on every day in Washington, but a funny thing about these two rent-seekers: they don’t pay taxes. That’s right, the two companies demanding more taxpayer subsidies don’t even pay corporate income taxes.

The EV tax credit is manufacturer specific and begins to phase out once a company has sold 200,000 eligible vehicles. GM and Tesla hit both that threshold last year, the only companies that have done so.  Taxpayers are still on the hook for the full EV tax credit for every other car company, adding up to billions of dollars, and even GM and Tesla buyers will continue to be eligible for reduced credits for a while. Billions already out the door, with billions more committed, but still not enough for GM and Tesla.  In a shameless display, these two companies—who pay no corporate tax—insist that they should get even more in subsidies from the rest of us.

Tesla has never turned a full year profit. Indeed, it has only managed four profitable quarters in its entire existence, surviving on revenue from California’s EV credit scheme and oceans of debt. So it is perhaps not surprising to see Tesla on the hunt for more government subsidies to keep it afloat. However many people, having grown accustom to headlines about GMs solid vehicle sales in recent years, may not realize that they too are not paying any federal corporate taxes.

In fact, GM has not paid corporate income taxes in more than a decade. For 2018, GM actually claimed a refund of $104 million on $11.8 billion in profit. This all stems from past GM mismanagement, when the company lost $86 billion from 2005-2009. Note that it wasn’t all due to the 2008 financial crisis. GM was losing money even during the peak of the economic cycle. The 2008 crisis, though, finally tipped GM into bankruptcy, leading to an unpopular bailout that ended up costing taxpayers about $10 billion even after some of the money was clawed back.

The legacy of GM’s bankruptcy is a tax write-off that has stretched over the last 10 years, as GM has only made about $69 billion in profit since 2009. GM probably will not be paying income tax for at least another few years.  A government bailout and no corporate taxes?  Government Motors indeed.

But apparently this isn’t good enough for GM, who along with Tesla, has deployed a small army of lobbyists to swarm Capitol Hill in search for a handout. GM and Tesla lobbyists claim that expanding the EV tax credit will “level the playing field” in the electric vehicle market. What they mean is that they already used up their allotted subsidies and don’t like the fact that other companies—a.k.a. their competitors—still qualify.  

The EV tax credit was originally sold as a way to get off of foreign oil imports. Give electric vehicles a jump-start to get the industry off the ground, they said. That is why there was cap placed on the total for each manufacturer to incentivize production, but also to protect taxpayers from being forced to indefinitely subsidize the industry. The electric vehicle industry today is clearly well established, selling millions of cars around the world and being the beneficiary of numerous other state and federal advantages and mandates. GM and Tesla have already benefited tremendously from the tax credit. They don’t need or deserve another subsidy.

We don’t blame corporations for taking advantage of the existing tax code to minimize their tax liability. But through bailouts and subsidies, GM has been floating on taxpayers credit for long enough. It is time to cut them off. Congress should end the EV tax credit, not extend it. President Trump is right to call for cutting their subsidies and we hope he will threaten to veto any legislation that would further extend GM’s gravy train. 


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