Sen. Elizabeth Warren (D-MA) has long feuded with Elon Musk. Still, her resentment over his billionaire status escalated into open warfare once operations began at the Department of Government Efficiency.
Warren’s chief complaint is that no one elected him, though she frequently criticizes him for not paying his fair share of taxes.
On March 5, Warren, a member of the Senate Finance Committee, sent nearly identical form letters to the CEOs of Tesla, Amazon, Meta, Apple, and Alphabet. Aside from inserting company-specific figures, the letters were essentially the same. I will use Warren’s letter to Elon Musk as an example. She began:
I write to you today with deep concern about your personal and financial ties to the Trump administration and how you may be exploiting this relationship to slash at least $2.5 billion from Tesla’s tax bill while leaving working families to pick up the tab.
Referring to a February analysis conducted by the left-leaning Institute on Taxation and Economic Policy, she stated that “Tesla paid no federal income tax last year and just $48 million over the last three years on $10.8 billion in U.S. profits.”
Warren continued, “American taxpayers will shoulder the burden of tax cuts for Tesla, and they deserve answers about your efforts to secure massive tax breaks for billionaire corporations.”
She asked that Musk respond to a list of questions by March 19, 2025.
It’s unclear if Musk has replied to Warren’s request.
In any case, The Wall Street Journal editorial board has provided the answer—and Warren won’t like it. Contrary to her claim that Musk is exploiting his ties to the Trump administration, a key reason Tesla pays so little in income taxes is that the “company benefits from green energy tax breaks passed by Democrats.”
According to the Journal:
Most of Tesla’s $7.1 billion in net income last year doesn’t even derive from selling electric vehicles, solar panels or battery storage. Some $2.8 billion came from the sale of regulatory credits to other auto makers that need to comply with government EV mandates. As EV mandates have increased, so have Tesla’s profits from such credit sales.
Tesla made another $1.6 billion in interest income on cash and short-term investment holdings. Democrats can thank the Biden inflation for allowing companies to earn higher interest on their cash holdings. In addition, Tesla recorded nearly $600 million in book income from price appreciation in its bitcoin holdings, but this is akin to an unrealized capital gain.
The editors explain that Tesla pays little to no taxes primarily because it operated at a loss every year from its founding in 2003 until 2020. Businesses are allowed to carry forward net operating losses to reduce future tax obligations, a policy designed to encourage entrepreneurship, as many companies take years to become profitable. This deduction also helps stabilize income fluctuations from year to year.
Specifically:
Tesla recorded $625 million from tax credits for its electric vehicles and $756 million for its solar and energy storage business last year, mostly from manufacturing batteries in the U.S. These tax credits can also be carried forward to offset future tax liabilities. Tesla had $1 billion in renewable energy tax credits on its books at the end of last year.
As much as Warren bristles at the thought of Elon Musk, Tesla’s low tax bill is largely the result of her party’s push for Americans to transition to electric vehicles—along with the fact that Tesla, as a relatively young company, only became profitable in 2020.
Elizabeth writes commentary for The Washington Examiner. She is an academy fellow at The Heritage Foundation and a member of the Editorial Board at The Sixteenth Council, a London think tank. Please follow Elizabeth on X or LinkedIn.
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