Keep It Grounded In Fact
(American Fuel & Petrochemical Manufacturers)
Electric vehicle subsidies largely steal from the poor and middle classes to give to the rich. It’s time to stop this picking of winners and losers.
Electric vehicles (EVs) remain a darling of the “Keep It in the Ground” folks, who tout them as the beginning of the end for fossil fuels. Even setting aside the reality that oil and natural gas are still critical to everything automotive—from seatbelts to the streets they drive on—this uncritical adoration of EVs has led to policy outcomes that are functionally regressive taxes on poor and middle-class families.
Put simply, electric vehicle subsidies and benefits accrue to wealthier households because rich families are vastly more likely to be able to purchase new EVs. This is a natural outcome of the current state of EVs:
- Electric vehicles cost more than traditional vehicles to purchase and have dramatically lower resale values, making them too expensive (and a poor investment) for many Americans
- They have range and charging restrictions that make them an unrealistic option for single-car individuals or households, so they are most often purchased as second or third vehicles
- Wealthy families are more likely to purchase new vehicles, and used EVs do not qualify for the subsidies (up to $7,500 in federal tax credits and up to $5,00 in state subsidies)
All of which means that while the cost of these subsidies is largely drawn from middle-class tax dollars, they disproportionately benefit the wealthy.
And these subsidies are not chump change—the federal tax credit is estimated to run about $2 billion over the course of the program, and California alone set aside $140 million for EV subsidies in its 2017-18 budget. That kind of money could fill a lot of potholes, rather than filling upper-income garages with EVs.
And taxpayers don’t stop covering the costs of their wealthier neighbors’ environmental statement vehicle once it rolls off the lot. Since some states offer registration rebates, free HOV, and free parking, once again these wealthy EV owners are free-loaders at the expense of middle-class families. Additionally, since EV owners don’t buy gas (and thus don’t pay the gas tax), those who do are basically covering the cost of road and infrastructure usage for EV drivers. The more EVs there are on the road, the more these costs will grow, eventually requiring higher gas taxes, registration fees, etc. to make up for the shortfall.
But the real financial burden is just beginning. Unlike traditional gas stations, which were built by the companies that owned them, states are directing utilities to build EV charging stations—and allowing them to pass along the costs to all utility customers. Creating a widespread, entirely new infrastructure of EV charging stations across a state could easily cost hundreds of millions (if not billions) of additional taxpayer dollars. That’s a hefty hit to families’ bottom line, especially since very few of them will directly benefit from these “improvements.”
So working-class Americans are seeing their state and federal tax dollars subsidize the purchase of electric vehicles by their wealthier neighbors; their gas tax dollars covering EV drivers’ highway and HOV lane usage; and now are facing higher utility bills to help make charging more convenient for EV drivers.
As Wayne Winegarden of the Pacific Research Institute recently concluded:
When upper-income households are the only ones benefiting from electric car subsidies, taxpayers should be asking what benefit they are getting from them.
There is also an opportunity cost when taxpayers spend hundreds of millions of dollars on subsidies. These dollars could be put to better use for other programs – or simply left to taxpayers to spend as they wish and boost the economy.
Editor’s Note: There is nothing inherently wrong with an electric vehicle. It is, after all, essentially a natural gas vehicle given that the original power is mostly generated using natural as fuel, but why subsidize such toys? Let the market decide. CNG vehicles make more sense and the cost is coming down. The cost of electric vehicles will also come down if that industry is forced to compete. This is the way it should and must work if we are to pursue sustainable energy policies. Subsidies are for losers. And, yes, that includes Elon Musk.