Kill, don’t expand, tax subsidies for electric vehicles

Ross Marchand

October 4, 2018

This article originally appeared in the Washington Examiner on October 1, 2018. 

The federal government can’t help but get wrapped up in the tech sector, placing ludicrously large bets on boondoggles that benefit few at the expense of many. 

Take, for example, electric vehicles and their associated tax credits. In 2008, then-President George W. Bush signed into law an up-to $7,500 tax credit for the purchase of the first 250,000 vehicles on the market. As a part of his massive, ill-advised stimulus package, then-President Barack Obama expanded this credit to include the first 200,000 vehicles sold by each manufacturer in the United States. 

Now, as major auto brands such as Tesla are breaching that 200,000 milestone, lawmakers are considering extending the credit. Policymakers ought to question the wisdom of such a costly move, a handout to high-income families with little or no environmental benefit. 

Unfortunately, members of Congress are having trouble kicking their costly addiction to shiny “green” tech. Over the summer, Tesla passed their 200,000 electric vehicle benchmark, triggering the start of a federal phase-out of tax benefits to vehicles produced by the company. If nothing changes, the EV tax credit will slowly phase out to zero percent of its current value over the next year. General Motors is not far behind, slated to pass the 200,000 mark by the beginning of 2019. But the Electric CARS Act of 2018, ( H.R. 6274), sponsored by 17 House Democrats, would eliminate the current cap altogether, ensuring unlimited subsidization over a ten-year period for producers of “clean tech.” 

Co-sponsor of the legislation, Rep. Peter Welch, D-Vt., hailed the legislation as a way to “make electric vehicles and their charging stations more affordable,” while reducing America’s environmental footprint. But the representative’s waxing begs the question as to who will benefit from the program. According to Dr. Wayne Winegarden of the Pacific Research Institute, the answer is clear: Households with adjusted gross incomes greater than $100,000 used nearly 80 percent of EV tax credits. Further, the tax credit doesn’t apply to used vehicles. But even if it did, owners would be on the line for four-figure battery replacement costs. 

Some green proponents concede that EV tax credits widen the wealth gap, but argue instead that the environmental benefits are well worth that cost. While “green” vehicles probably don’t reduce carbon emissions (depending on the underlying energy grid they are drawing from), the extraction process required for lithium-and-cobalt car batteries is filthy, exploitative, and breeds instability. 

Investigating conditions at Congolese mines, the Washington Post concludes, “mining activity exposes local communities to levels of toxic metals that appear to be linked to ailments that include breathing problems and birth defects, health officials say.” Sure, these jobs may still be the best option for workers feigning disease and starvation. But the resulting pollution holds back entire communities, including the children being forced to mine. And, due to the political instability gripping Congo, mine disruption can reap havoc on battery prices worldwide. 

Rather than gamble America’s energy fortunes on subsidies and dirty, despicable labor practices, policymakers should embrace a diverse portfolio that powers the country at a low cost. This means a vibrant mix of vehicles and electricity sources at every price point, from the working poor to the wealthy. 

But don’t tax struggling families more to fuel the vehicle purchases of well-off households. It’s unfair, and it makes for a less-clean Earth. 

Rather than expand out the EV tax credit, lawmakers need to phase it out altogether. Resulting savings can be used for widespread tax relief, instead of targeted giveaways to consumers and manufacturers who don’t need them.