11/15/2019

Opinion: The Electric Kool-Aid Subsidy Test

Mr. Trump’s initial response to GM’s plant closure news was to threaten to punish the company by stripping its federal subsidies. White House economic adviser Larry Kudlow later acknowledged that Mr. Trump can’t legally single out GM for subsidy retribution. Instead the White House may take the better route of proposing to eliminate subsidies for electric vehicles, in particular the $7,500 consumer tax credit for battery-powered cars.

That handout began as part of the Obama 2009 “stimulus,” and as always supporters said it would be temporary. A decade on, GM, Nissan and Tesla are nearing or exceeding the 200,000-per-manufacturer cap on EV sales that qualify for the full credit. So they are now seeking increases in the cap, joined by other car makers and Democrats preaching climate alarm.

The credits are a classic middle-class-to-rich income transfer. EV batteries are expensive, which means the average starting price for electric cars is around $42,000. That’s some $8,000 more than the average price of a new vehicle, and $22,000 more than the average price of a new gasoline-powered small car.

Wayne Winegarden of the Pacific Research Institute looked at 2014 IRS data and found that 79% of federal EV tax credits were claimed by households with adjusted gross income of more than $100,000. Only 1% of EV buyers earned less than $50,000.

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