Rich People on Welfare

Welfare programs for the poor are resented by the middle-class for good reason. Money is siphoned from the taxpayer and given to people who refuse to work or obey the laws and customs of society. The welfare class, when given a chance, makes clear they do not appreciate the help and resent the fact the taxpayer expects them to be grateful. It is no wonder the middle generally resents the lower in a social democracy like America.

Welfare takes many forms. This story about Tesla is an example of how the rich get tax money shoved into their pockets.

Tesla Motors, an electric car maker backed by the U.S. Department of Energy (DOE), posted a $49.8 million loss in the first quarter of 2014. This loss compared to a profit of $11.2 million in the same period a year earlier despite selling more cars.(i) Last year’s profit was not due to electric car sales, but to sales of California zero-emission-vehicle environmental credits to other auto manufacturers. Those lucrative credits have declined and tight battery supply has made it harder to produce the carmaker’s electric vehicles.

“Sales of California zero-emission-vehicle environmental credits to other auto manufacturers” is a nice way of saying free money from the middle-class. The state forces the normal car makers to tax their customers on behalf of Tesla. The cost of those credits, after all, is a part of the cost of building cars. That cost is passed onto the consumer in the price of the car. Tesla, in effect, gets to tax every car buyer in California.

During the first quarter of 2013, Tesla received about $68 million (12 percent of revenue) from the sale of zero vehicle emission credits. Note that without the sale of these credits, the company would have lost over $50 million during the first quarter of 2013.[v] According to a Wall Street analyst, Tesla earned as much as $250 million in 2013 on their sale. Translated into dollars per vehicle, Tesla made as much as $35,000 extra on each sale of its luxury Model S electric sports sedan through state environmental credits that it sold to other auto manufacturers that need to buy credits to satisfy California regulations. Adding in the Federal tax credit of $7,500 per vehicle and a state rebate of $2,500 per vehicle, the state and federal incentives totaled as much as $45,000 per vehicle that Tesla sold for as much as $100,000, depending on the model and options.[vi]  Essentially, regular taxpayers who buy typical cars, trucks and minivans are heavily subsidizing an additional car for a clientele whose average income is just under $300,000 per year.

This is the math problem that haunts modern corporatism. Hidden taxes to subsidize unprofitable ventures looks like a great solution to the “problems” of the market. The rulers look around and say we need to be using electric cars, but the pesky market refuses to comply. That’s called a market failure. The solution to “market failure” is to form these public-private partnerships to “jump start” business like Tesla in order to “nudge” the market in the preferred direction. In theory, electric cars will become competitive at some point and then the market will take care of the rest.

There are two problems with this. One is the money spent on this hidden tax does not come from nothing. It is money that would be spent on some other good or service. These other industries go to the state looking for help for the same reason Tesla gets help. The system quickly becomes a game of whack-a-mole. The state is forever on the hunt for new Peters to rob in order to pay the growing list of Pauls. Government becomes a highwayman, robbing anyone trying to operate a business.

The other problem is the math is not zero sum. The state thinks it can supply an unlimited amount of energy to the economy, as if it is a first order perpetual motion machine. That’s no more possible in an economy than it is in physics. Eventually, the economy begins to grind to a halt or the state grinds to a halt. In California,  the state is bankrupt. Several of its cities are in bankruptcy and the state has no way to pay its pension obligations. Looks like the state will fail first.

That’s the big difference between welfare for the rich versus the poor. The poor are an annoyance. The cost of the various programs is not insignificant, but it is largely paid by the rich. The high earners pay the bulk of the taxes which cover the trillions in welfare payments. The vast web of corporate welfare, subsidy schemes like Tesla and financial shenanigans in the banking system loots the middle class. That’s what the war on the middle is intended to accomplish. That’s why the middle-class is disappearing.

3 thoughts on “Rich People on Welfare

  1. Meh – they always trot out that horse to beat over the heads of the poor. You should have graduated high school, you should have postponed having kids, you should have studied something serious in college, etc. The fact is that when you look at the private sector jobs that are created each month the majority of the new jobs are low wage (retail, health aide, hospitality). College grads are working at Starbucks and not all of them majored in something impractical. Tech and automation are hollowing out decent jobs – in the future it may make the most sense to forget debt slavery and devotion to some stupid private sector job and become a parasite freeloader working 20 hours at Chipotle.

    • The poor are poor because they made bad choices. Welfare amplifies those choices, keeping them in poverty. The rich benefit by pulling up the ladder and avoiding competition with the middle.

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