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Tesla reported $5.5 billion in profit last year. It depends on federally funded roads, bridges and freeways for its electric vehicles. Yet the company pays $0 in federal taxes.
What’s wrong with this picture?
Well, everything, not least that Tesla is apparently in compliance with the U.S. tax code, which contains so many loopholes and exemptions that a multibillion-dollar corporation swimming in cash can legally avoid paying a cent to Uncle Sam.
Tesla explains its avoidance of federal taxes by insisting that all of the company’s profit comes from overseas. It’s U.S. operations, the company says, lose money.
Therefore, as per the terms of the tax code, Tesla owes no federal taxes.
While this may be perfectly legal, it’s clearly not right.
Not only do all U.S. businesses have an obligation to contribute their fair share to public coffers, but Tesla, due to its reliance on well-maintained transit infrastructure, simply would not be able to operate without the support of American taxpayers.
It’s also not uncommon for U.S. businesses with extensive overseas operations to indulge in a little creative accounting so their domestic units appear to lose money, even though, as in Tesla’s case, they account for a significant part of overall revenue.
What can be done? Any rejiggering of tax law is a complex and often politically perilous process. But there are measures lawmakers could (and should) explore.
Just as the alternative minimum tax is intended to prevent wealthy people from squirreling away all their money in offshore tax havens, a corporate minimum would address situations like Tesla’s.
How about any U.S. company that earns profits, regardless of source, at least meet a minimum threshold of federal tax payments?
Moreover, if it can be shown that a U.S. business indisputably benefits from public resources, there should be a provision in the corporate tax code that the company’s tax payments reflect this.
Again, it doesn’t appear that Tesla, and similar businesses, are breaking any laws.
But that means our laws are broken. And need to be fixed.
FAQs
“Companies are allowed to 'carry forward' excess losses to years with profits, with the old losses canceling out current earnings,” the report explains. That's how Tesla, which last year made $10 billion in profit on $96 billion in revenue, was able to pay no federal income tax.
How much did Tesla pay in tax? ›
Despite that, Tesla not only didn't pay any federal taxes, but it received $1 million in refunds from the government.
Why do companies not pay federal taxes? ›
How do profitable corporations get away with paying no U.S. income tax? Their most lucrative (and perfectly legal) tax avoidance strategies include accelerated depreciation, the offshoring of profits, generous deductions for appreciated employee stock options, and tax credits.
Who pays the most taxes in the US? ›
Although most Americans believe the middle class bears the heaviest tax burden, it's actually the top 1% who pay the highest federal tax rate, at 25.9%, the Tax Foundation analysis found. But the average tax rate paid by the top 1% has declined in recent decades, according to the Tax Foundation analysis.
Does Tesla pay no federal taxes? ›
Tesla is perhaps the most dramatic example. Over the period 2018-2022, the electric car maker raked in $4.4 billion in profits but paid no federal income taxes.
How does Tesla tax deduction work? ›
Customers who take delivery of a qualified new Tesla vehicle and meet all federal requirements are eligible for a tax credit up to $7,500, which can be deducted from the purchase price at time of delivery for eligible cash or financing purchases through Tesla.
How much does Tesla profit after taxes? ›
For the full year, Tesla reported net income of almost $15 billion including the one-time tax benefit. Excluding it, the company made $10.88 billion, down 23% from 2022. Gross profit margin was 25.6% in 2022, but that dropped to 18.2% last year.
Who has paid the most taxes in history? ›
CNBC's Robert Frank reports on Elon Musk's tax bill which is the largest in history. Musk will pay a total of $12 billion for 2021. Frank joins 'Squawk on the Street' to discuss the details.
How much did Elon Musk get in tax subsidies? ›
According to a Los Angeles Times investigation, Musk's companies had received an estimated $4.9 billion in government support by 2015, and they've gotten more since. Here's a look at some of the federal and state-level government subsidies that have contributed to building Musk's empire.
Is it a crime to not pay federal taxes? ›
Under 26 U.S.C. § 7203, it is a crime to intentionally fail to file a return, pay a tax, keep necessary records, or provide information that is required by the IRS.
The Tax Division also pursues criminal investigations and prosecutions against those individuals and entities who willfully fail to comply with their employment tax responsibilities, as well as those who aid and assist them in failing to meet those responsibilities.
Can I just not pay federal taxes? ›
“Not filing a tax return can create a penalty of 5% per month, up to 25%. This is based on the tax due,” Armstrong says. “The penalty for not paying or paying late is one-tenth of the penalty of not filing.” Not filing only makes your financial mess far worse and far more expensive.
Is there a tax write off for owning a Tesla? ›
If you bought a new, qualified plug-in electric vehicle (EV) in 2022 or before, you may be eligible for a clean vehicle tax credit up to $7,500 under Internal Revenue Code Section 30D. The credit equals: $2,917 for a vehicle with a battery capacity of at least 5 kilowatt hours (kWh)
How do companies not pay taxes? ›
In some cases, corporations find additional ways to reduce their taxable income. The methods include net operating losses, accelerated depreciation, tax credits, and profit shifting.
Why did Tesla lose tax credit? ›
China isn't an approved country, and it makes most of the battery materials. That appears to be the reason most of the vehicles lost the credit. There is also a requirement about where battery components are assembled. Rivian, for instance, says it meets the raw materials criteria but not the component criteria.
