The EV tax credit must be re­pealed

The Progress-Index Weekend - - OPINION -

En­acted in 2008, the EV tax credit — which al­lows elec­tric car buy­ers to qual­ify for up to $7,500 in fed­eral sub­si­dies — was meant to foster the fledg­ling elec­tric ve­hi­cle in­dus­try. By law, the credit phases out once a man­u­fac­turer makes its 200,000th car. Tesla reached that thresh­old ear­lier this year and its credit will be­gin phas­ing out next year. GM is ex­pected to reach it by the end of 2018, and Nis­san is not far be­hind.

Pro­pos­als in the House and Se­nate — sup­ported by in­tense lob­by­ing by Tesla, GM and Nis­san — would lift the cap on the elec­tric ve­hi­cle (EV) tax credit and pre­serve this sub­sidy for large car mak­ers.

Congress should re­ject any ef­fort to broaden this tax credit. In fact, law­mak­ers would do well to re­peal it en­tirely. The EV tax credit has a poor track record of boost­ing elec­tric ve­hi­cle sales or lim­it­ing car­bon emis­sions and con­sti­tutes a mas­sive sub­sidy from or­di­nary tax­pay­ers to the wealth­i­est Amer­i­cans.

In 2016, 57,066 in­di­vid­ual tax­pay­ers claimed $375 mil­lion in EV tax cred­its. The vast ma­jor­ity of these in­di­vid­u­als earn more than $200,000 per year. Since high-in­come in­di­vid­u­als make up the ma­jor­ity of elec­tric car buy­ers, the top 20 per­cent of in­come earn­ers re­ceive about 90 per­cent of EV tax cred­its. Even more strik­ing, more than 99 per­cent of to­tal EV tax cred­its in 2014 went to house­holds with an ad­justed gross in­come above $50,000.

Nor is the cost of the EV tax credit in­signif­i­cant. Ac­cord­ing to non­par­ti­san es­ti­mates, un­der cur­rent law the EV tax credit will cost $7.5 bil­lion from 2018 to 2022. If Tesla, GM and Nis­san get their way and the credit is un­capped, its cost could grow con­sid­er­ably.

In short, the EV tax credit rep­re­sents bil­lions of dol­lars flow­ing from or­di­nary tax­pay­ers — who will likely never ben­e­fit from the tax credit — to the wealth­i­est Amer­i­cans, for whom the $7,500 max­i­mum credit is a rel­a­tively less sig­nif­i­cant in­cen­tive.

Sci­en­tific re­search also in­di­cates that the ra­tio­nale for pro­mot­ing elec­tric car own­er­ship — re­duc­ing car­bon emis­sions — is largely bo­gus. Com­pared to to­day’s new, low-pol­lut­ing in­ter­nal com­bus­tion ve­hi­cles, the en­ergy gen­er­a­tion re­quired to power elec­tric ve­hi­cles will likely emit more harm­ful air pol­lu­tants (in­clud­ing sul­fur diox­ide, ni­tro­gen ox­ides and par­tic­u­lates), not less. While elec­tric cars do re­duce car­bon-diox­ide emis­sions, that re­duc­tion is ex­pected to be be­low 1 per­cent of to­tal fore­cast U.S. car­bon-diox­ide emis­sions by 2050 and will have no mea­sur­able im­pact on global cli­mate con­di­tions.

De­spite the EV tax credit and other gov­ern­ment in­cen­tives, the elec­tric ve­hi­cle mar­ket con­tin­ues to face slug­gish growth in de­mand. This might be ex­plained by the fact that even af­ter fed­eral tax cred­its are taken into ac­count, elec­tric ve­hi­cles still have higher life­time costs than con­ven­tional au­to­mo­biles. Con­sumers must also con­sider the fact that elec­tric ve­hi­cles of­ten have short ranges and take many hours to recharge. Out of 17.25 mil­lion to­tal au­to­mo­bile sales in the United States last year, elec­tric cars ac­counted for fewer than 200,000 — barely 1 per­cent of the mar­ket.

Pick­ing win­ners and losers in the mar­ket­place should be busi­ness of con­sumers, not the job of the gov­ern­ment. Per­haps one day ad­vances in tech­nol­ogy will make elec­tric ve­hi­cles more af­ford­able, re­li­able and con­ve­nient than in­ter­nal com­bus­tion ve­hi­cles. When that day comes, elec­tric ve­hi­cle mak­ers will thrive be­cause of mar­ket com­pe­ti­tion and con­sumer choice, not gov­ern­ment hand­outs.

It’s time to re­peal the EV tax credit and let the mar­ket work.

Liam Si­gaud Amer­i­can Con­sumer In­sti­tute

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.