According to a 2016 Reuters/Ipsos Election Day poll, a majority of Americans believe the economy is “rigged” to benefit wealthy insiders. Unfortunately, Washington lawmakers are doing little to change this perception.
The latest example of how the well-connected are able to work out sweetheart deals at the expense of everyone else is legislation that would extend taxpayer subsidies for electric vehicle companies. If enacted, the legislation would lift the current constraint limiting federal subsidies for electric vehicles on the first 200,000 vehicle-per-manufacturer cap.
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Among the EV companies that stand to benefit the most from the legislation is Tesla Inc., one of the world’s largest EV companies, that recently reached its 200,000 vehicle-per-manufacturer cap.
And at a time when it seems like Republicans and Democrats agree on little these days, corporate welfare has bipartisan support in Congress. Not surprisingly, lawmakers from states where Tesla has a large presence have already cosponsored legislation or are planning to introduce legislation to lift the cap on federal subsidies.
Supporters claim that federal subsidies for EVs are necessary in order to protect the “infant industry.” But as Milton Friedman and Rose D. Friedman of the Hoover Institution put it, this is nothing more than a “smoke screen,” because once industries and businesses come to rely on these government handouts, these so-called infants never grow up. And once imposed, these government handouts are seldom eliminated.
And then there is evidence from a University of Chicago study that found that, at most, 40 percent of EV purchases could be attributed to subsidies. In other words, taxpayers are funding a majority of purchases that would have been made even without the subsidy.
Who benefits from this generosity with our hard-earned money? Mostly the wealthy who can afford a luxury EV that can cost up to about two times what the median American household earns in a year. It’s why Pacific Research Institute found that 79 percent of electric vehicle plug-in tax credits were claimed by households with adjusted gross incomes of greater than $100,000 per year. In case you are wondering, the median household income was $61,372 in 2017.
As Thomas Pyle, president of the American Energy Alliance, rightly asks: “Why should a typical middle-class American family … subsidize the lifestyles of the rich and famous?”
If lawmakers want to help out EV companies, doling out taxpayer-funded subsidies for select companies is not the answer. Indeed, companies that claim to rely on subsidies to remain competitive often spend more time working to keep their subsidy than improving their product (companies benefitting from tariffs do the same thing). It would be better to create an economic environment that allows businesses to compete on an equal footing and let consumers decide.
The American people seem to agree. A recent poll found that a majority of Americans said the federal government should not subsidize EV purchases.
Their reticence is understandable. After all, the federal government’s previous attempts at picking winners and losers in the energy sector have produced some spectacular failures. According to a Government Accountability Office report, federal green loan programs cost taxpayers $2.21 billion between 2008 and 2014. As of 2015, the GAO concluded that taxpayers were securing $28 billion in loans for 30 different green energy projects.
If Washington lawmakers want to change the perception that the economy is “rigged” to benefit well-connected insiders, eliminating this taxpayer-powered electric gravy train would be a good place to start.
Martin Rodriguez is a policy analyst at Americans for Prosperity.
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