Industry News jay-z-tesla

Published on August 15th, 2014 | by Christopher DeMorro

19

Tesla Owner Tax Rebates Could Total $1.5 Billion

jay-z-tesla

With a starting price of around $70,000, the Tesla Model S costs more than twice the average new car transaction price in the U.S. Those well-off to be able to buy one though also get a generous $7,500 Federal tax rebate, on top of any state incentives, taking a sizable chunk off of the MSRP even on the better-equipped versions.

All this government money will add up, and by the time the $7,500 tax credit phases out, Tesla owners could end up claiming more than $1.5 billion. By the time the Tesla Model III rolls out, there might not be many Tesla tax credits left.

The IRS has imposed a 200,000 unit per manufacturer limit on the credit, of which Tesla owners may have claimed as many as 60,000 by the end of this year. It’s hard to know for sure, as Tesla doesn’t release detailed sales figures, so it’s hard to know how many Teslas are sold in America, versus Europe, China, and the rest of the world. If Tesla manages to stick with its aggressive timeline though, it will produce 75,000 vehicles in 2015, and 100,000 in 2016. The IRS only says that the credit runs out after production of 200,000 plug-in vehicles, not 200,000 rebates, which means that by the time the $35,000 Tesla Model III won’t be eligible for that $7,500 discount.

Instead, only buyers who can afford to plunk down $70,000+ on a Model X or Model S will be able to take advantage of the program, and if all of them do, it would cost taxpayers $1.5 billion. This includes a number of celebrities like rapper/producer Jay-Z, NBA player Mike Conley, actor Seth Green, and actress Cameron Diaz. Many of these people could have afforded to buy the Model S regardless, but I’d be surprised if any of their accountants didn’t take advantage of the tax credits.

There’s also numerous state incentives to consider, which in California is an additional $2,500 and in Georgia is a heady $5,000 per vehicle. Of course this assumes each and every Tesla owner is in the U.S., and actually claims the tax credit. California is also considering an amendment that would tie the state rebate to income levels, but nothing like that has been proposed on the national level.

Of course the Model S isn’t the only EV with access to incentives; both the Chevy Volt and Nissan LEAF can take full advantage of the $7,500 tax credit, and both have racked up substantial sales as well. But Tesla seems to have the wind at its back, and could exhaust its tax rebates before either vehicle, and at a substantial cost. As of May, Nissan had sold an estimated 50,000 LEAF EVs in the U.S.; Tesla is probably close to that, even though the LEAF enjoyed more than a year head start.

One could make the argument that the government has helped pave the way for Tesla’s success, especially when you add in the $465 million low-interest government loan Tesla used to get started. Granted, Tesla paid it back early, and other automakers got even more assistance from the same loan program, but it still helped Tesla, perhaps immeasurably. As an advocate for EVs, I certainly feel like it’s the right thing to do, especially given the embedded advantages petrol-powered cars enjoy…but as a taxpayer, it still gets under my skin a little bit that by the time a Tesla I can afford goes on the market, the rich people will probably have used all the tax credits up. And if you ask me, I’m allowed to think it’s a good idea, and still be a little bit bothered by it. I guess I shoulda made my first million by now.

Tell me your thoughts on Tesla’s generous tax subsidies; is it money well spent, or just more hidden corporate welfare?

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About the Author

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or esle, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.



  • Steve Hanley

    This is absolutely stupid. Why should my tax dollars go to help some schmuck buy a $100,000 car? When is the government going to help me pay my monthly car payment? : (

    • Knetter

      Pretty simple, when you buy a new electric car.

      • Steve Hanley

        America purports to worship at the altar of capitalism and free enterprise. The government has no business distorting the market. If electric cars are commercially viable, they should succeed on their own. Or not.

        End of story.

        • Turbofroggy

          Same thing for big oil. All the subsidies should be taken away from the most profitable companies on the planet, oil companies. This is about 1/20th the amount of subsidies we give away to oil companies.

          • Steve Hanley

            I agree completely. I am in favor of ending corporate welfare in all forms.

            If a government wants to build a highway system that benefits all citizens and promotes commerce, that is its proper role, imho. But if government opts to build a roadway for the private use of a limited number of citizens, that is an inappropriate use of public money. Again, imho.

            If government wants to fund research into advanced battery technology and electronic control systems, good. Or if it wants to fund the construction of recharging stations that all citizens can use, I’m fine with that.

            But if it wants to pay bribes to select individuals to buy a particular product, that’s a corruption of the marketplace and an inappropriate use of my tax dollars.

          • zn

            Government support can also be used to help fledgling industries develop into fully viable business ecosystems, which directly boosts the economy and creates new, often highly-skilled jobs. It can also lead to the generation of innovative new intellectual property which can then be exported to other countries.

            Electric cars fit all of these criteria. The market for EVs is experiencing huge growth at the moment, but the potential for even greater, world-wide growth is astounding. If Tesla or any other US car maker can get an early lead in this new market, it may evolve into a huge windfall later on when the market matures and established players become dominant.

            This would naturally be great for the US economy, and would more than justify the government’s initial financial support, even if a few ‘rich schmucks’ do get a free lunch along the way.

          • Steve Hanley

            I do not dispute that government investment can provide a powerful boost to the economy. Perhaps the clearest example of that is the Interstate Highway System. There is little doubt that the system of good, high speed roads criss crossing the country has added trillions of dollars to the US economy over the past 60+ years.

            If the government chooses to fund research into advanced batteries and/or public recharging stations, I am all for it.

            But when the government says, “Psst. Hey buddy. Go buy yourself an electric car and we will help pay for it!”, I think that crosses the line by distorting the free market.

            I have no problem with the government operating the air traffic control system but i do have a problem with it saying to travellers, “If you buy a ticket to Peoria, we will pay half. ”

            By the same token, I have no problem with government setting standards for autonomous cars or testing them in the real world. But I do have a problem with tax dollars being shovelled to individuals to buy one.

            Most of all, i think it is a corruption of the capitalist model for manufacturers to build not what sells but what qualifies for government rebates/incentives/credits.

            Bottom line? If you can’t build it and sell it for a profit, you shouldn’t build it.

            You mileage may vary. See dealer for details! : ),

          • zn

            I look at it differently. If the government had said to car makers ‘We’ll give $10 million to anyone who makes an electric car’, then yes, that would be a case of over-intervention. But by offering the consumer the financial incentive, it effectively says to buyers ‘You make the choice based on who you think has the better product’, and that is exactly how the free market should operate.

            Let’s not forget though that the original rationale for these incentives was to help reduce America’s greenhouse gas emissions, much like the Cash For Clunkers program. Government intervention has always been used to affect strategic shifts in the country’s social, economic or cultural trajectory, and in response to the risks of climate change, providing a supportive environment for EVs to prosper is exactly what the government should be doing.

          • Steve Hanley

            I appreciate and respect your position. I guess at the core of my concerns is that we are now seeing the major manufacturers now basing their decisions on which cars to build on what government subsidies/credits are available. Quite a few of the models being produced are “compliance cars” that are intended to satisfy the whims of regulators and are never intended to sell in big numbers. Ergo, the argument that these cars are in the front lines of the war on climate change is so much ballyho (that’s the polite phase!) and nothing more.

            I also mistrust our government to make wise choices. Everything it does every day, in ways big and small, is driven by how much campaign donation cash it will garner for the re-election campaigns of our so called “elected officials”. Our officials from the President on down aren’t elected any more (if they ever were). They are paid puppets for those with the deepest pockets.

            When government says giving massive tax credits to a select few for the greater good, I become suspicious. Make that very suspicious.

            Thanks for the conversation. Most enjoyable. : )

          • zn

            Likewise, an enjoyable discussion!

          • jeffhre

            “Quite a few of the models being produced are “compliance cars” that are intended to satisfy the whims of regulators and are never intended to sell in big numbers. Ergo, the argument that these cars are in the front lines of the war on climate change is so much ballyho (that’s the polite phase!) and nothing more.”

            CAARB instituted these rules because California often has the most polluted air in the nation.

          • jeffhre

            It has been calculated that a gasoline powered vehicle will trigger over $10,000 in oil and gas company subsidies over it’s operating lifetime. These subsidies of course will be avoided by EV purchases. This creates a picture more complicated than “But when the government says, “Psst. Hey buddy. Go buy yourself an electric car and we will help pay for it!”

            And it is quite possible that upon a full accounting, gas vehicle drivers will owe EV drivers a substantial debt, on a dollar per dollar tax basis. The market may still be distorted, but it is government benefits to fossil fuel interests causing that distortion.

            “I think that crosses the line by distorting the free market.” The very existence of government distorts the free market. I believe that distortions which make the market more equitable, thriving, verdant and secure make any sense. Allowing the markets to function those values is a balancing act.

          • Steve Hanley

            Of course you are right, Jeff. The biggest subsidy to the petroleum industry is the US military, which for almost a century has existed largely to guarantee access to “our” oil. And even if we become energy independent, we will still call on our military to control how petroleum assets are distributed to the rest of the world.

            Thanks for your comment. My thoughts were more narrowly based, but you remind us that there is a bigger picture to be considered.

    • Freeindi

      Ding your ICE and buy a Volt, leaf

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