Electric Vehicles Give Taxpayers Sticker Shock

If your neighbor planned to fit her home with solar panels, there would be nothing wrong with sincerely wishing her the best of luck. Under no circumstances, however, would you be expected to dig into your own pocket to help her pay for it.

But lo and behold, when it comes to electric vehicles, members of Congress and state public utility commissions are demanding that all of us continue to pony up to pay the tab for the purchases of others.

Right now, the EV tax credit gives EV buyers a $7,500 taxpayer funded reimbursement, but that credit only applies to the first 200,000 EVs a manufacturer produces in a year. After a manufacturer hits that quota, the credit starts to phase out before expiring for that company.  

The tax subsidy for Tesla started to wind down at the beginning of this year, and General Motors’ tax credits began to phase out on April 1. But as Ronald Reagan once noted, government programs and subsidies have an immortal life, and now Democrats and even some Republicans are quietly working with EV manufacturers on a deal to lift the cap on the EV tax credit.

In fact, Sens. Debbie Stabenow (D-Mich.), Lamar Alexander (R-Tenn.), Gary Peters (D-Mich.) and Susan Collins (R-Maine) recently introduced legislation to expand electric vehicle tax credits and increase the production and sale of EVs around the country. Even Sen. Chuck Grassley (R-Iowa) weighed in and said he will not oppose legislation to extend EV tax credits if it’s part of a larger must-pass legislative package.  

This credit was of course created to incentivize the sale of EVs to placate environmentalists, but proponents of extending these incentives fail to highlight the fact that, at its heart, it is a corporate giveaway paid for on the backs of taxpayers who don’t drive EVs or use any of its supporting infrastructure, which they also subsidize. This sets up a cozy racket whereby taxpayers of all income levels receive the privilege of forking over their money to benefit a small number of higher-income drivers.

In fact, Americans in the top 20 percent of income earners received roughly 90 percent of the federal tax credits for electric vehicles. What is even more egregious is that a disproportionate share of the costs of EV subsidies will continue to be borne by lower-income consumers.

The average cost of a new vehicle today tops $37,000, a cost beyond the reach of tens of millions of taxpayers currently subsidizing EV purchases, which on average carry a sticker price $7,500 above this figure. The EV tax subsidy is little more than a blatant wealth transfer at the expense of lower-income taxpayers. But don’t expect the Democrats to mention this during any one of their tirades against income inequality.

Beyond this affront, some states are proposing higher energy rates to pay for EV infrastructure such as charging stations. But if the government sponsors programs that provide discounted or free charging stations to EV owners, taxpayers and electricity ratepayers will pay the tab on those services, as well.

Funds from electricity ratepayers, a majority of which drive conventional vehicles, will be diverted to subsidize electric vehicles or the infrastructure to recharge them. This is especially noteworthy given that EV drivers do not pay gas taxes that contribute to the funding pool used for highway and road maintenance.

There is no argument that the EV taxpayer subsidized credit rigs the market in favor of a government-approved purchase, corrupting the efficient balance of competition and consumer choice that underlies the free market and benefits consumers as a whole. It is also patently unfair to those consumers unable to afford a product they assist wealthier consumers to purchase.

President Donald Trump’s proposed budget seeks to end these handouts, but a slew of lawmakers have dug in to oppose him to lift the 200,000 vehicle tax credit cap. For the benefit of millions of consumers being bilked by this scheme, as well as basic taxpayer fairness, let us hope the president is successful.


Gerard Scimeca is an attorney and vice president of CASE, Consumer Action for a Strong Economy, a free market-oriented consumer advocacy organization.

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