When we think of corporate welfare we often think of handouts from the government to industry. The bailouts in the aftermath of the 2008 financial crisis were one particularly egregious type of corporate welfare, as were the government takeovers of Chrysler in the 1980s and General Motors during the last recession. But not all corporate welfare is as obvious, nor is all of it directed towards companies themselves.
The tax credits that the government awards to taxpayers for purchases of electric vehicles is corporate welfare masquerading as a boon to taxpayers. It’s attempting to skew consumer preferences and purchasing behavior away from vehicles with internal combustion engines and towards vehicles with electric motors. It subsidizes the purchase of vehicles that consumers otherwise wouldn’t buy. That has benefited companies such as Tesla, which only produces electric vehicles. In fact, without that government interference in the marketplace it’s doubtful that Tesla would be anywhere close to as successful as it is right now.
Taxation is theft, that’s a given, and the ideal tax regime is one that taxes not at all. Since that’s not likely, any measures that reduce the tax burden should be welcomed. But tax credits such as the one for electric vehicles, which skew the marketplace and are an attempt not to reduce the tax burden but rather to influence behavior, should be abhorred.
The government has no business trying to impose its idea of what consumers should buy onto society, nor should it be using the tax code as a method of encouraging (or discouraging) various types of consumer activity or behavior. Companies such as Tesla should be allowed to succeed only if they produce a good or service that consumers actually want, not one that is subsidized through tax credits.
The $7,500 tax credit was set to expire once a manufacturer had delivered 200,000 electric vehicles, yet Tesla and others will now be lobbying to make the credit permanent by eliminating that cap. When you follow that debate, remember that it’s not a debate over reducing taxpayers’ tax burdens, but a debate about continuing to provide subsidies for products that most consumers wouldn’t otherwise purchase.