Elon Musk's Tesla paid zero federal income tax in 2025 despite reporting $5.7 billion in U.S. income, according to a new analysis by the Institute on Taxation and Economic Policy.

The electric vehicle giant's effective tax rate stands at a microscopic 0.4 percent over the three-year period from 2023 to 2025, during which it earned $12.58 billion in U.S. income but paid only $48 million in current federal tax. The statutory corporate tax rate is 21 percent.

The numbers don't lie, but executives sometimes do. Tesla accomplished this feat through a combination of accelerated depreciation ($500 million in savings), stock option tax credits ($172 million), research and development credits ($352 million), and net operating loss carryforwards from prior years.

Here's the twist that reveals who really benefits: While Tesla avoided federal tax obligations on its U.S. earnings, the company paid $1.2 billion in cash taxes globally last year—with over $1 billion going to China and other foreign governments. U.S. taxpayers? They got $28 million attributed to prior tax years.

There's nothing illegal about Tesla's tax strategy. But the disclosure demonstrates how profitable corporations are supposed to pay 21 percent under current law, yet America's largest companies engineer their way around those obligations while smaller businesses pay full freight.

The competitive disadvantage is stark: A midsize manufacturer in Ohio or Michigan generating $10 million in profit pays its full share. Tesla, with nearly $6 billion in U.S. income, pays nothing.

For context, Tesla's U.S. tax avoidance equals roughly $1.2 billion in foregone federal revenue at the statutory rate—money that could fund infrastructure, education, or deficit reduction. Instead, it stays on Tesla's balance sheet while competitors who lack the scale for sophisticated tax engineering subsidize government operations.

The revelation comes as Congress debates corporate tax policy and as the Biden administration has proposed a 15 percent minimum tax on large corporations. Tesla's 2025 performance provides Exhibit A for why such reforms gain traction.

Cui bono? The shareholders and executives who benefit from retained earnings. Not the Treasury, and certainly not the small businesses competing without billion-dollar tax departments.