I’m embarrassed and ashamed to admit this, but I was once a Bernie Sanders supporter. My enthusiasm for Sanders and my belief that he was sincere about curbing the growing wealth disparity in America was such that I registered as a Democratic so I could vote for Sanders in the 2016 presidential primary. Given my Sanders support the media would have once labeled me a “progressive,” but I view myself as having been played a fool.
I’ve become wise to Sanders, the millionaire “Socialist Democrat” with three homes. I judge a person by the company they keep, and Sanders was in Michigan last week stumping for Rep. Rashida Tlaib and Andy Levin, two of his deplorable Congressional comrades.
Tlaib is a world-renowned antisemite. Levin is a labor faker who despite all his union advocacy, remained silent when management at the once-renowned local hospital in his district allegedly violated more than 30 labor regulations and spent nearly $2 million on union busters who successfully intimidated nurses and stopped them from organizing.
While in Michigan, Sanders was thundering again about taking on America’s 1 percent, a constant refrain of Rep. Alexandria Ocasio-Cortez and Senator Elizabeth Warren, who also has endorsed and stumped for Levin.
“We need members of Congress to tell the billionaire class, to tell these CEOs… that they cannot have it all,” Sanders reportedly told the crowd.
The Inflation Reduction Act
Here are the two biggest beneficiaries of the proposed Inflation Reduction Act concocted by Senate Democrats that includes a $7,500 tax credit on specially targeted electric vehicles: GM CEO Mary Barra, and Ford CEO Jim Farley, who respectively earned $29 million and $21 million in compensation in 2021, despite the pandemic.
The proposed bill strikes me as having been dictated by GM’s and Ford’s lobbyists, as it benefits the two companies’ electric vehicles while excluding three of their most formidable competitors. Tesla’s billionaire founder and CEO Elon Musk technically also benefits from the tax breaks, but he no longer needs them and would gain a major competitive advantage if they were eliminated.
What’s galling is the proposed bill incentivizes Barra and Farley to continue selling more highly profitable luxury electric vehicles most Americans can’t afford and building them in Mexico. Yes, the U.S. Congress wants to provide tax breaks for vehicles made in Mexico, where GM and Ford have significantly expanded their operations in past years and plan to continue to do so.
The tax breaks are on top of the billions GM has received from U.S. and Michigan taxpayers to manufacture its vehicles. Ford’s Farley, who just took $150 million from Michigan taxpayers to build his highly profitable electric F-150 truck and other vehicles in the Detroit area, has let it be known that he plans to fire 8,000 salaried workers in the U.S., representing 26 percent of his company’s salaried workforce. Most of the employees Farley will turf are likely in Michigan, so even if he makes good on the 6,000 new jobs he pledged to snare the $150 million in tax breaks, 2,000 net jobs will be lost.
The proposed Senate bill does nothing to further mitigate climate change, as all the taxpayer subsidized electric vehicles, save for two, are in short supply and selling for hefty premiums without any incentives. At the end of the day, the inflation reduction bill is intended to provide financial support to people who can easily afford costly luxury vehicles so that Barra and Farley can sell more of them.
The fine print
According to Jared Rosenholtz, the editor-at-large for the trade publication CarBuzz, only 12 EVs qualify for the proposed tax credit. Under the proposed bill, an EV sedan, hatch, or wagon costing $55,000 or less are eligible for the sweetheart tax breaks; SUVs, trucks, and vans costing up to $80,000 also are eligible. Peddling trucks with lots of expensive extras is how GM and Ford make most of their money.
Luxury electric vehicles are considerably more profitable than those priced to appeal to Americans with modest or limited incomes. Building EVs in Mexico further enhances profitability because auto plant workers in that country are paid poverty wages. Understandably, Barra’s ratio of total compensation to the median of all GM employees’ total compensation in 2021 was 420-1. By comparison, the average S&P company’s CEO-to-worker pay ratio was 324-1.
Ford’s Mexican made Mustang Mach-E is eligible for the tax credit, and so will GM’s Mexican made Blazer and Equinox vehicles when they become available. GM’s Bolt and Bolt EUV also would benefit from the $7,500 tax credit, which would bring down their effective costs to under $20,000. Despite a shortage of EVs, GM was forced to reduce the cost of its Bolt vehicles by roughly $6,000 earlier this year and they still aren’t selling well. Even in the Detroit area, where the Bolt is manufactured, the vehicle ranks a distant third in EV sales to Ford’s Mustang and the Tesla Model 3.
Despite President Biden’s “climate emergency” threat, Rosenholtz said the proposed bill doesn’t include tax breaks for the Hyundai Ioniq 5 and Kia EV6, which he characterized as “some of the best (EV) vehicles on sale today.”
“If the goal is truly to sell more EVs, not just help out domestic automakers, we’d like to see (the made in North America) stipulation removed,” Rosenholtz said.
The bill’s pricing limits conveniently makes Rivian trucks ineligible for tax breaks, giving GM and Ford an additional marketing edge. Rivian CEO Robert “RJ” Scaringe strikes me as a stand-up guy considerably more deserving of U.S. taxpayer support than Barra and Farley. Scaringe founded Rivian in 2009 and was committed to building electric cars when GM and Ford were still fighting California’s more stringent emission standards.
In May 2020, at the height of the pandemic, Rivian turned down a $1 million grant it was owed by the Town of Normal in Illinois where the company has a manufacturing plant. Normal was among Rivian’s initial investors, pledging $1 million and tax breaks if certain hiring and investment thresholds were met. Rivian made good on its commitments.
“The impact of Covid-19 has reminded us all of the importance of community,” Scaringe wrote to Normal town officials explaining why Rivian wasn’t taking the grant. “The main asset of any community is the people, and as resources stretch thinner for every community across the world we want to do whatever is possible for a pre-production company in our position to help alleviate pressure on our home.”
Amazon and Ford were also early Rivian investors, but when Rivian’s production hiccups caused its stock to decline, Ford was quick to start dumping some of its Rivian stock. Ford sold its Rivian stock for $26.88 a share. Rivian’s stock closed today at $35, indicating that Farley’s investment judgment is as faulty as the vehicles he sells.
Under the proposed bill the Tesla Model 3, and possibly the Model Y, would be eligible for $7,500 tax breaks. Both vehicles are in high demand and have a backlog of orders. Tesla’s Semi electric truck would also be eligible for up to $40,000 in incentives under the proposed Senate bill; according to the trade publication electric, Tesla already has a reservation backlog of several thousand units.
Protecting private equity billionaires
Notably, the proposed Senate bill still allows private equity firms to enjoy their obscene carried interest loophole, although they must hold their investments for five instead of three years to enjoy the sweetheart deal. Simply put, carried interest allows private equity partners, many of them mega billionaires, to pay lower taxes on the profits they make raping and pillaging companies.
Here’s what billionaire investor Bill Ackman, a rare Wall Street person with a tad of honesty, thinks of the carried interest tax scam.
Yeah, Bernie, your fellow Democrats really want to stick it to America’s CEOs and billionaires. When it comes to protecting America’s 1 percent Democrats aren’t much different than Republicans. You talk a good game, but at the end of the day no one in Congress takes you seriously.
Postscript: After posting this commentary, it was reported that Andy Levin was defeated in Michigan’s 11th District primary by Haley Stevens. It appears that voters in the 11th District weren’t swayed by Sanders’ rhetoric when he passed through town.