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Apple isn’t rotten but the American taxing system is

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POSTED May 27, 2013 10:46 p.m.

Why does Uncle Sam insist on subsidizing rich people?

Instead of Congress beating up Apple for following the tax code that Congress created, they might want to answer that question.

A lot of patting on the back took place in Washington, D.C., last week when Telsa said they were paying off the $452.4 million federal taxpayer loan that they received. Boosters of big government are crowing that this proves their theory that the right green industry just needed a little assistance to succeed.

Guess again. A Morgan Stanley report makes it clear why the decade-old electric car firm finally hit “profitability” this year. It wasn’t because of the federal loan. It was because Congress - and state legislatures as well - decided to subsidize the rich.

Morgan Stanley report Telsa made $40.6 million from tax credits in 2012 and is on track to pocket $250 million in the same manner this year.

That’s $290.6 million in tax subsidizes to well-off individuals so they can buy a Telsa.

Not only does the $290.6 million not justify the handful of manufacturing jobs Telsa created in Fremont, but it isn’t very cost effective in terms of the benefits for air quality.

If you look into buying an all-electric car and understand how most electricity is generated in this country, there is overwhelming evidence that it isn’t a cost-effective way to reduce emissions. Many power generation plants generate air pollution to such a point that over the lifetime of an electric car it is highly likely it will have a bigger carbon footprint that a high efficiency gas powered car or most hybrids.

But even putting a debate over the net carbon footprint aside, the largeness of the federal government with the electric car tax credit isn’t justified.

Someone who can afford a $69,900 vehicle doesn’t need a $7,500 tax credit. Toss in California’s $2,500 rebate and you’ve got government giving those folks who are well off $10,000 to buy a car.

These aren’t a Prius or a Ford Connect Electric. Telsa builds luxury and sports cars.

If a vehicle that is environmental friendly is really cost-effective in the long-haul, you don’t need Congress to offer tax credits.

When I purchased my Ford Escape hybrid in December of 2005, I did so for two reasons - long-term savings and my personal sense of civic obligation. Based on my driving patterns and how gasoline fluctuated, I assumed that gasoline - that was $2.47 a gallon in 2005 - would hit $4.50 a gallon over the minimum of 12 years I expected to keep the vehicle. Add to it the fact I don’t have to smog it every two years and additional small savings since a hybrid needs less brake work, I expect to offset or be slightly ahead of the $7,500 extra it cost me to buy a hybrid instead of a standard gasoline powered four cylinder. Since it would cost me the same even after figuring in financing costs and the fact I could handle the payments, I felt I had an obligation to reduce the amount of air pollution I send south to Bakersfield.

That doesn’t fault anyone who doesn’t buy a hybrid. It’s just that people who are in a position to do so can afford to make such a decision without the government’s help.

Had I waited several months, Uncle Sam would have provided me with a $5,000 tax credit for buying a hybrid. If it was available when I bought in December of 2005, it would not have changed my mind although I would have been $5,000 ahead thanks to my fellow taxpayers. These are taxpayers that aren’t given the opportunity to say whether they want their tax dollars essentially subsidizing a purchase I make that they couldn’t necessarily afford to buy.

Once the tax credits are no longer propping up Telsa Motors, the odds are sales will drop. Meanwhile firms such as Ford and GM are developing hybrids and efficient gas vehicles that are have a much better chance of being sold in large enough numbers to have an impact on air quality and improved fuel efficiency than the Telsa that is marketed toward the financially well off.

Apple CEO Tim Cook fully understands the insanity of using the tax code to determine winners and losers as well as to social engineer. He supports a simplified tax system that would even increase the tax rate that Apple is paying right now but would probably end up costing less in the long haul. It is because a simple system would be devoid of the convoluted financial decisions the current tax system has people, businesses, and corporations make effectively hiding the true cost of everything from buying an electric car to owning a house.

A simplified tax system also has the potential to reduce hanky panky within the Internal Revenue Service.

The original income tax form in 1913 only had three pages and no additional schedules. The instructions were simple and condensed on one page.

Congress imposed a 1 percent tax on net personal incomes above $3,000 and 6 percent surtax on incomes of more than $500,000. That was it.

Obviously the percentages have to be higher and even the threshold for net taxable income increased, but there is no reason why federal income tax for individuals, businesses, and corporations can’t be that simple and straightforward.



This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or 209-249-3519.

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