Are Electric Car Subsidies Just Giveaways To The Wealthy?

Gov. Jerry Brown and some California lawmakers are pushing Golden State drivers to the fast lane of an all-electric car future.

For example, San Francisco Democrat Phil Ting has introduced legislation to outlaw the sale of traditional gas-powered cars by the year 2040. My colleague Kerry Jackson has called this idea “a farce worthy of The Onion.”

But is there really a sufficient demand and marketplace to make an all-electric car future on the horizon a realistic possibility? Not if you look at sales trends. According to the most recent figures, non-hybrid electric cars are just 0.5% of the car market.

To artificially stimulate demand, lawmakers in Washington D.C., California, and many states are trying to play car salesman. They have offered lavish subsidies — paid for by you and me — to try and spur drivers to buy electric cars.

Electric cars are significantly more expensive than traditional, gas-powered models. The average price of the 10 electric cars with the longest ranges in 2017 was nearly $42,000 — compared with $34,000 for an average new car and $20,000 for an average new compact car.

Subsidies, these policymakers masquerading as government car salesmen hope, will stimulate the mass purchase of electric cars. When combining federal, state, and local subsidies, car buyers can get as much as $15,000 or more in government subsidies for buying an electric car.

Are these subsidies working? Are poor and working-class Californians rushing out to buy Teslas to replaces their old gas guzzlers? Not exactly.

In fact, according to the findings of my new Pacific Research Institute study, “Costly Subsidies for the Rich,” taxpayer-funded electric car subsidies have become another government giveaway to the rich.

Reviewing the latest figures of tax credits for electric car purchases, 79% were claimed by households with annual incomes greater than $100,000 per year. Combined with households making greater than $50,000 per year, upper-income taxpayers claimed 99% of the tax credits for electric cars.

Government at every level is spending a significant sum on electric car subsidies. The total value of federal manufacturing grants and loans was $40.7 billion over the lifetime of the program, with another $2 billion in federal subsidies for electric car purchases.

In California, another $140 million was appropriated for state electric car subsidies as part of the 2017-18 state budget.

Let me make one thing clear — questioning electric car subsidies is not questioning electric cars.  There is no doubt that Teslas, Chevy Volts, Nissan Leafs, and many of the other electric cars on the road today are great vehicles.

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.

It’s not a bad thing to hope for an electric-car future, but government mandates and subsidies aren’t the way to encourage market demand when it doesn’t really exist today.

If California and other states really want to encourage an electric car future, they should embrace the market and remove the barriers to cheap and efficient production that put the cost of an electric car out of reach for many in the first place.

Winegarden is a senior fellow in Business and Economics for the Pacific Research Institute. His new study on electric car subsidies, “Costly Subsidies for the Rich” can be downloaded at www.pacificresearch.org.

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