The bane of the private sector is taxes. Everyone knows this. Taxes lead to less hiring (except for tax accountants and attorneys), less profit, and businesses being less competitive. The higher the tax rate, the worse it all becomes.
On the flip side, subsidization can be a boon to the private sector. If your company is lucky enough or connected enough to somehow get your product(s) subsidized, you are assured of more sales. It’s a great deal! By having your product or business subsidized, you can effectively undercut your competition and sell many more units than you otherwise would.
But how do companies get their products subsidized, and who would be stupid enough to do such a thing? The answer to the “who” question is the government. State and municipal governments often offer huge tax incentives to lure companies to set up shop. Sometimes the incentives to these companies are zero taxes for a period of time. This is a form of indirect subsidy, allowing the company to lower its costs and increase the margin on its products lowering the price of the product(s).
The company obviously benefits from a lessened tax burden, and the state or city benefits from increased employment. It’s sold as a win-win, except for companies that have to compete with the unfair advantage and the tax payers have to make up the difference in higher taxes.
Then there are federal government subsidies, which are directed to a certain product or industry. These days it’s the “green” industry. Everything “green” or “renewable” is heavily subsidized by the feds. This arrangement is a win-lose. The subsidized never have to reimburse the subsidizer.
Take, for example, the electric car industry. It’s a fact that electric cars do not sell unless they are underwritten by federal or state governments. Actually, nothing in any “green” industry sells without a government giveaway. Electric cars are ridiculously expensive. The only way to get anyone to buy them is to subsidize the crap of them, incentivizing customers into the purchase. The government gives away thousands of our tax dollars (per vehicle) just to advance their dimwitted “green” agenda. It’s a win for the car dealer and the purchaser, but a loss for the rest of us, who are forced to assist in the purchase.
But incentives don’t last forever, and auto dealers in Georgia are finding this out. For 15 years the state of Georgia has offered a tax credit of $5000 for the purchase of a dopey electric vehicle. This is on top of the federal giveaway of around $7500.
Did I forget to mention that “public” charging stations are FREE. The government, using confiscated tax-payer money, pays to install and maintain these stations and charges the “green” vehicle owner ZERO dollars to fill-up his or her vehicle. This means “that drivers in Georgia could lease one of the lower-priced electric cars such as the Nissan Leaf for about $200 a month” and spend almost nothing additional to drive it.
Some in the Georgia legislature have finally come to their senses. “I thought the credit turned from an incentive into a virtual entitlement,” said state Rep. Chuck Martin, R-Alpharetta, who spearheaded the drive in the state Legislature to sunset the tax credit.
This is a lesson to all in how governments are able to artificially manipulate markets. There was a large uptick in sales of electric cars just prior to the sunset provision taking effect on July 1, 2015. After that the sales numbers began to crater, and have been in freefall ever since.
When the market is able to correct and venture back into the real world the result is a drastic decline in sales of 88.9% within just one month. In the month of June, 338 electric cars were sold. The August number was 148.
Representative Martin added, “It was essentially taking money that would have been paid into taxes in Georgia and a subset of people were getting their car paid for” by other people.
But isn’t that what lefty socialists do – spend other people’s money to engineer a desired outcome?
And to that, Margaret Thatcher said it best: “The problem with socialism is that you eventually run out of other people’s money.”