Monthly Archives: October 2010

The Oct. 17 edition of Bloomberg Businessweek featured a story about Terry McAuliffe’s new business endeavor: building an electric car company.

McAuliffe, a successful businessman and multi-millionaire, is perhaps the most well-connected Democrat in the country who has never held elective office.  He is close friends with Bill and Hillary Clinton, served as the head of the Democratic National Committee, and has raised millions upon millions of dollars for Democrats all over the country.   But ever the businessman, he’s also working on his next great investment, one that he believes will be a “billion-plus company.”

But for McAuliffe’s investment to pay off, he says he first needs government assistance.

“You want this, you’ve got to offer incentives,” he says as he woos leaders in states where McAuliffe is considering building his electric car company, MyCar.  “I want to see legislation.  That’s part of our negotiation.”

It’s already working.  After McAuliffe bought MyCar from the Chinese government, Mississippi governor Haley Barbour bestowed enough incentives on McAuliffe that he located a 400,000 square foot facility in Tunica, Mississippi.  (Gov. Barbour is the former head of the Republican National Committee and before becoming governor, was one of the most successful and well-connected Republican lobbyists in the country.)

Did Smurfit-Stone Container Corporation, or Spiral Fab, Inc., or Etheridge Enterprises, or other manufacturers in Mississippi receive similar subsidies?  Doubtful.  The incentives must have been hefty too, because as a resident of Virginia and gubernatorial candidate last year, McAuliffe would have done wonders for his political future had he located the plant in his home state.  In this case, return on investment trumped political expediency.

McAuliffe is not only after state subsidies.  According to Businessweek, he plans to lobby the federal government to revive portions of the failed Cap and Trade legislation that died in the U.S. Senate.  Predictably (if not shamelessly), McAuliffe is looking for federal tax breaks for green energy, requirements that electricity producers use renewable sources, and subsidies for stations where electric vehicles can recharge.

“I implored to President Obama, let us have an Apollo project on electric cars,” McAuliffe said in an interview.  In other words, he implored to President Obama, Please make my investment pay off.  Please help me become much wealthier.

In fact, subsidies are the central financial component McAuliffe’s business plan.   Of course they are.  Why pay market value for a plant in Mississippi when you don’t have to?  And why stop there?

He wants cities to not charge for parking if you drive one of his cars, he wants federally or state mandated charging stations, and toll-free toll lanes.  All of these incentives increase the chances that his will investment will pay off.

Yes, this kind of thing happens all the time, although not often so brazenly.  Usually, the beneficiary of favorable legislation is a little more circumspect.  He will typically hire a team of lobbyists who espouse the “greater good” arguments before unsuspecting lawmakers.

A couple of years ago in Arizona, for example, the owners of land in the remote city of Eloy, who also happened to be investors in a Rock-n-Roll theme park, hired lobbyists to create a special entertainment district in, you guessed it, Eloy.  The district would subsidize both income and property taxes for the investors and provide tax free bonds.

In another example, manufacturers of renewable energy components told lawmakers that they would not locate in Arizona unless they received special tax breaks.  Lawmakers obliged.

These examples are no different from McAuliffe’s.  Government should always refrain from picking winners and losers.  It is indefensible to subsidize some people at the expense of others.  Not only must other taxpayers foot the bill for the subsidies, but too often the government subsidizes the new competition of the ones footing the bill.

Terry McAuliffe needs about as much government assistance for his investment portfolio as Warren Buffett.  Perhaps governor Barbour’s not aware of voter angst these days.

I’ve got nothing against lawyers, but Ron Johnson’s ad against Russ Feingold in Wisconsin’s Senate race is pretty darn good.

“They’re going to tax the hell out of me.”
“They’re taxing everybody they can, just because California is in debt.”
“They see the money can be made, like unbelievable taxation, enough to push me out of business.”

These aren’t your local Tea Partiers, these are quotes from pot smokers who oppose California’s Prop. 19, which would legalize recreational use of marijuana.  Their opposition stems from what they believe is California’s central goal: tax revenue.

Has it dawned on the stoners yet that they sound eerily similar to the millions of Californians — including the very rich — who have fled the Golden State due to high taxes and excessive regulations?

Between 2000 and 2008, California lost $26 billion in net adjusted gross income to all other states.  Of that, $11 billion was exported  just to Arizona and Nevada.

And it’s not just high taxes that have the stoners upset, it’s excessive regulations.  Dragonfly de la Luz (pictured above) says she’s against the initiative because it creates too many restrictions.  She says the limitation on the size of the area one can grow pot is insufficient.

“These exotic strains that we know and love are going to quickly become obsolete because a 5-by-5 space is just not enough space to breed and experiment all these new strains.”  Well.

Welcome to the real world, pot smokers.  If government’s intervention into your business is a bit much, you now know how the rest of us feel.

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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.