What the Wall Street Journal Editorial Board Got Wrong About Tesla’s Tax Avoidance

Tesla’s income tax avoidance is still in the news, and that’s a good thing. The debate has now moved beyond whether Tesla really paid no federal income taxes on $2.4 billion of U.S income in 2024 (the company’s own annual report says so quite clearly) to why this happened. This is also a good thing for those who care about tax reform. But a recent Wall Street Journal editorial dedicated to this question manages to conceal more than it reveals on this important topic.

ITEP’s findings on this topic, which generated widespread public outrage on its release in January, identified four factors that explain Tesla’s zero percent income tax rate in 2024: accelerated depreciation, executive stock options, unspecified “U.S. tax credits,” and net operating loss carryforwards. Because each of these appear to be tax provisions that the U.S. Congress has enacted into law, the Journal’s editors conclude that Tesla’s CEO Elon Musk is “merely playing by Democratic rules.”

This assertion misses the mark for two important reasons.

First, Tesla’s tax avoidance has the fingerprints of President Donald Trump and Republican leaders in Congress all over it.

The company’s annual report shows clearly that Tesla raked in over $500 million of tax breaks from accelerated depreciation (a tax break dramatically expanded by President Trump during his first term in office) last year.  This single tax break exceeds the $470 million that Tesla should theoretically have owed at the 21 percent statutory rate last year. And of course, Trump’s successful push to reduce the federal corporate tax rate from 35 to 21 percent in 2017 did more to facilitate low corporate taxes than any other measure lawmakers have devised since the Reagan administration.

This isn’t to say that there’s not bipartisan responsibility for the current state of corporate tax avoidance. Depreciation tax breaks, for example, have enjoyed legislative support historically from tax writers in both major parties. But the Trump tax cuts turbocharged corporate tax avoidance after 2017, as an exhaustive ITEP survey of large, profitable corporations recently detailed, lowering the bar for large corporations seeking to zero out their tax bills, despite near-universal opposition from Democrats in Congress at the time.

Second, the Journal’s “playing by Democratic rules” stance is also misleading in its implication that Musk and Tesla are merely taking the rules as they find them, helpless pawns in Congress’ tax policy game.

A recent Washington Post retrospective on Tesla’s use of government handouts finds that “Musk is one of the greatest beneficiaries of the taxpayers’ coffers” and that Musk himself has pushed to preserve the flow of public money to prop up his business. This is neither surprising nor unusual: a big part of the reason why our corporate tax laws are riddled with generous giveaways is that business lobbyists have relentlessly pressured lawmakers to enact them, while arguing that they can’t compete in the world economy without these tax breaks. Tesla and other Fortune 500 corporations aren’t meekly following the rules: they’re effectively dictating the rules to a compliant Congress.

At a time when Congressional tax writers are poised to turn to a proposed extension of the Trump administration’s temporary 2017 personal income tax cuts, lawmakers should also recognize that Trump’s corporate income tax cuts (which are permanent law) played a pivotal role in allowing Tesla and dozens of other large companies to avoid all income taxes in 2024.

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