This Tax Day, End EV Subsidies

It’s almost Tax Day, and (not so) shockingly, there are glitches in the tax collection and filing process. On March 31, Detroit Free Press and USA Today contributor Susan Tompor noted, “Some drivers who bought electric vehicles in 2024 have found it impossible to claim their EV [electric vehicle] tax credits now when filing their tax returns, thanks to a glitch. … The National Association of Auto Dealers informed its members that the Internal Revenue Service has reopened its portal for dealers to submit time of sale reports for EVs sold last year. It’s an unusual step to fix a nagging tax problem.”

The truth is that the EV tax credit itself is the glitch. For too long, taxpayers have had to foot the bill for their wealthier neighbors’ vehicle choices that aren’t even better for the environment. It’s time for lawmakers to finally get rid of the EV credit and make the entire tax system simpler and fairer.

Under the current system, EV buyers can claim an up-to $7,500 tax credit — provided the bizarre sourcing and production requirements are met. Additionally, married couples filing jointly can only claim the credit if they make $300,000 or less. That figure lowers to $225,000 for heads of households and $150,000 for all other filers.

The architects of the Inflation Reduction Act (IRA) believed that, by adding modest income requirements, the tax credit could ditch its “Robin Hood in reverse” reputation.

Unfortunately, low-income Americans are still footing the bill for rich Americans’ EVs. According to a 2024 Gallup survey, 14 percent of “upper income” Americans (with household income exceeding $100,000) report owning an EV, compared to 5 percent of “middle income” Americans and just 3 percent of “lower income” Americans.

This EV ownership gap is backed up by industry survey data, which finds that EV buyers are about three times wealthier than ordinary Americans. Even with bank-breaking tax credits, EVs remain significantly more expensive than conventional vehicles and are effectively a status symbol for the wealthy. And, even with the income limits put in place, it’s easy for Americans earning six-figures to claim the credit at other taxpayers’ expense. In all but Washington, DC and a few other high-cost cities, a family earning $300,000 per year is a wealthy one, and their toys should not be subsidized by Americans living paycheck to paycheck.

This unfair wealth transfer doesn’t come cheap. According to a 2024 analysis by the Tax Foundation, EV tax credits can cost up to $8 billion per year. And, this total can easily skyrocket if politicians play politics and loosen income caps or North American sourcing requirements. And, for all this check-writing, there’s little evidence that these tax credits will do anything for the environment.

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 facing 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 wreak havoc on battery prices worldwide. 

The IRA’s sponsors may have thought they were avoiding this issue by creating strict sourcing requirements. The reality is that significant importation is inevitable — unless consumers are ready to pay $500,000 for an EV.

EV tax credits are not only deeply unfair and harmful to vulnerable populations but are also incredibly costly. This Tax Day, policymakers should axe the tax credit and work on pro-growth tax reform.

Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.