(Note: The writer is answering the question: “Is scrapping a $7,500 tax credit for electric car buyers a good idea?”)
WASHINGTON — Relatively few Americans have electric cars. But every American taxpayer has helped pay to buy them and keep them on the road.
That’s because Uncle Sam subsidizes those buying electric vehicles with a $7,500 tax credit. Add in-state and local government incentives and the “free money” can easily top 10 grand. And it keeps flowing in the form of perks like subsidized charging stations and access to HOV lanes.
Who benefits most from these government giveaways? Primarily people who don’t need help buying a car.
The Congressional Research Service reports that filers with an adjusted gross income of $100,000 or more claimed 78 percent of the tax credits in 2016. Clearly, it’s a subsidy for the well-to-do.
The subsidy has helped prop up electric vehicle sales, but has done little to reduce carbon emissions or wean America off foreign oil — the two big selling points when Congress approved the giveaway.
Jonathan Lesser, an economist at Continental Resources, found negligible climate impact from increased adoption of electric vehicles — now or in the future.
Based on the Energy Information Administration’s sales projections for electric vehicle sales and use, Lesser calculates that “the net reduction in carbon dioxide emissions between 2018 and 2050 would be only about one-half of 1 percent of total forecast U.S. energy-related carbon emissions.”
Such a small reduction in emissions would have a practically undetectable effect on global temperatures.
Dependence on foreign oil is no longer a problem, but that’s because of the domestic energy boom created by smart extraction technologies.
When President George W. Bush OK’d tax credits for plug-in electrics in 2008, America was producing 5 million barrels of crude oil per day. Today, we’re producing more than twice that amount.
In December, for the first time in more than 35 years, the U.S. exported more oil and refined petroleum products than it imported.
The tax credit reflects an “infant industry” rationale: to help a new, innovative technology get off the ground, then let it fly on its own. That’s why the credit covers each manufacturer’s first 200,000 sales, then begins to phase out.
Tesla and GM are now in the phase-out period, which is why the two automakers are pushing lawmakers to lift the cap.
Are electric vehicles still in their infancy? Even when the credit was created, the concept was anything but new.
Electric vehicles debuted in the U.S. in 1896. By the early 1900s, they accounted for nearly a third of all vehicles on the road.
The Ford Model T changed all of that, but electric vehicles enjoyed blips of popularity in the 1970s and ’90s, too.
Today, the industry is quite mature, with more than 40 different available — about a quarter of them with a battery range exceeding 200 miles.
Any rationale for the subsidy is long gone. But subsidies are notoriously hard to eliminate in a town where politicians, lobbyists and special interests groups thrive on trading favors.
That’s unfortunate, because government subsidies are no recipe for long-term success in any industry. Reliance on preferential treatment from Washington actually stifles competition and innovation — the things that improve products and drive down sticker prices.
It’s time to pull the plug on electric vehicle subsidies, as well as subsidies for oil, biofuels and all other energy sources.
Americans drive more than 3 trillion miles each year and spend hundreds of billions of dollars on gasoline. That translates into a huge market demand for cost-efficient vehicles and fuel — and plenty of incentive enough to spur competition and innovation in the industry.
And taxpayers should be able to purchase the car that best suits their means and their needs — without nudging from Washington and without having to subsidize purchases by those better off than themselves.
Nicolas Loris is The Herbert and Joyce Morgan Fellow at Heritage Foundation, a think-tank based in Washington, D.C. Readers may write him at Heritage, 214 Massachusetts Ave. NE, Washington, DC 20002.