Tuesday, January 25, 2011

Subsidizing $109,000 luxury sports cars

Specialty electric-car maker Tesla Motors also had a successful initial public offering and is being celebrated as some kind of testament to the entrepreneurial spirit. For Tesla, this is pure PR.

Tesla is capitalized via a $465 million no-collateral federal loan. This means that if Tesla goes out of business, the taxpayer will take the loss, while if Tesla becomes a hit, its management and private investors will keep all the profit. The company bought a factory in Fremont, Calif. The Department of Labor made $19 million in special payments to workers there, federal taxpayers subsidizing the Tesla labor force. The firm's electric cars entitle buyers to a $7,500 tax credit, plus sales tax exemption in many states, meaning Tesla marketing receives significant subsidies -- average people are taxed so wealthy Tesla buyers receive extra discounts. Compared to its size, Tesla is more heavily subsidized than General Motors at the low point. Basically, the company's existence is a giant raised middle finger to the taxpayer.

And what's the product? A $109,000 luxury sports car that accelerates from zero to 60 mph in 3.9 seconds, the speed of the hottest Porsches. Such speed has no relevance to everyday driving; rather, it is useful solely for road-rage behavior such as running red lights and cutting others off. Taxes forcibly removed from the pockets of average people now fund a rich person's plaything. I dread the moment President Barack Obama has his picture taken next to a Tesla, as if throwing the public's money away on this toy for the Silicon Valley rich were an accomplishment.
--Gregg Easterbrook, ESPN.com, on the social price of a commercially available electric car. Posted by request of MEL.

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