Tesla, Taxes And Free-Market Hypocrisy

 

Tesla Model S

Tesla Motors Tesla Motors Inc. makes electric cars — and they must be pretty good cars because they cost $70,000. Despite selling really expensive cars, Tesla has long been the darling of the left. Nothing says "I am committed to saving the polar bears" better than driving a luxury, battery-powered car.

For several years, Tesla has been in a fight with the states. Tesla does not use dealerships. It sells its cars on its website and in showrooms. Almost every state bans or limits the sale of automobiles directly to customers, which is terrible and reflects the power of auto dealerships. The dealerships want you to buy your car from them because, well, that's how they make money. And because they are wealthy and connected, they have persuaded many states to make it hard for automakers to sell directly to people. After all, if you were buying a car directly from a manufacturer, who would sponsor the local Little League teams?

The auto dealers argue that direct sales will result in massive layoffs, disruptions in the community, and less odious car-selling techniques. Actually, they're not making the last argument, but they're saying that without dealerships, customers will never figure out where or how to get their cars repaired. By the way, the dealerships pay lawmakers with campaign contributions and promised future support if the lawmakers keep Tesla out of their states.

Tesla's response is that the car dealerships' position violates every notion of free markets. Tesla argues that prohibiting direct sales protects only the dealerships and harms the consumer. Tesla is right. There's no reason to prohibit a consumer from buying directly from the manufacturer. Cutting out the middleman is generally a good thing — unless you're the middleman.

So Tesla is right — but few companies owe their existence to the government and the public fisc as Tesla does. The idea that Tesla can enter a legislature and sing the praises of free markets with a straight face is rich. In 2010 the company received a $500 million loan from the U.S. Department of Energy. It prospers because of the federal tax credit of up to $7,500, plus $2,500 in California credits for each new purchase. It receives credits from the California Air Resources Board, which it sells for a large profit. Last year the company received $34 million in tax breaks from California as an incentive to build a plant in the San Francisco area. Tesla has the gall to encourage consumers to ask state lawmakers to subsidize the purchase of their vehicles. Free markets, indeed.

Tesla wants to expand its operations and is considering investing up to $5 billion for a new plant in Nevada, Arizona, New Mexico, or Texas, all of which ban direct sales except Nevada. Tesla wants Texas to repeal its direct sale prohibition, but while the Lone Star State is offering infrastructure money, it's not budging on the direct sale issue. Arizona has already introduced a bill to lift its ban on direct sales and Gov. Jan Brewer (R) is promising tax breaks. New Mexico Gov. Susana Martinez (R) has promised that the state will do whatever is necessary to land the expected 6,500 jobs. Rumors are that in lieu of tax breaks, Nevada is willing to purchase all the land Tesla needs for the plant. You can be sure the free-market-loving Tesla lobbyists are in the middle of the fight.