By Steve Bruns
The government should never be permitted to pick winners and losers in the marketplace. It goes against the free market system that our economy is built on. But in the case of electric vehicles (EVs), I believe that’s exactly what the government is doing. By giving purchasers of EVs up to $7,500 in tax credit, the government is engaging in a bad fiscal policy that prevents the market from creating natural competition among manufacturers. Luckily, this tax credit is also temporary.
As it is set now, EV buyers only receive this $7,500 tax credit until each select manufacturer sells 200,000 of these vehicles. After that, the credit starts a wind down phase for six quarters before it eventually expires for that company. Implemented in 2010, several EV manufacturers, including Tesla and General Motors (GM), are in the midst of that phase-out period, and they’re not happy about it.
Now, in an effort to keep this tax-funded boost to their sales going, Tesla and GM are pushing Congress to lift the cap on the tax credit.
While the EV tax credit was intended to make EVs more affordable to the average consumer, the numbers tell a very different story. One study found that over 80 percent of tax credits claimed are by people who make more than 100,000 dollars a year. These are not the average American consumers. In fact, it is the top 20 percent of income earners that will receive about 90 percent of the tax credits for EVs. The EV tax credit is nothing more than a billion-dollar subsidy for wealthy people that simply don’t need it.
Perhaps at first this was the government’s honest attempt to help reduce carbon emissions. The numbers, however, show that this goal is essentially achievable at the rate we’re going. Extending the tax credit would have a “negligible impact” on gasoline demand, one study found. With less than a 1 percent decrease in gasoline demand by 2035, extending the EV tax credit would not reduce carbon emissions in any significant way. Further, the suggestion that EVs emit “zero” carbon emissions is also incorrect. The fact of the matter is that in addition to the carbon emissions generation in the production of EVS, almost all EU countries generate significant carbon emissions from the charging of the EV batteries.
Another point of contention among Ohioans regarding the EV tax credit is that nearly half of EVs are sold in California. In 2018 there were 4,456 EVs sold in Ohio. Those — in addition to the EVs that were already in Ohio — added up so that for every 1,000 people in Ohio, there was less than 1 EV registered. Now compare that to California where 153.442 EVs sold in 2018, bringing their average to 8.64 EVs per 1,000 Californians. Why should Ohio taxpayers have to give their hard-earned money to purchasers of a car that hardly exists within their own state?
The answer, if you ask 78 percent of Ohioans, is that they shouldn’t have to. And they’re right.
With such an obviously regressive tax policy, the government should recognize that outside of the small percentage of wealthy Americans who stand to benefit from this program, there are very few supporters. Those responsible for representing Ohioans such as Senator Rob Portman must prioritize the ordinary American consumer and promote tax policies that treat all Americans and products equally.
The EV tax credit falls short on both accounts.