What Is the Electric Vehicle Subsidy?


The electric vehicle subsidy (EVS) is a government program that provides tax credits to subsidize the purchase of an electric vehicle. These tax credits are income transfers to the wealthy and are an ineffective climate policy. Moreover, they are wasteful and costly. Let’s take a look at the details of EVS subsidies. Listed below are the best subsidies available in each state. And remember that the rebate amounts may vary.

EV subsidies are an income transfer to the affluent

It’s no secret that electric vehicles are the newest rage in cars, but it’s also no secret that federal EV subsidies are a massive income transfer to the affluent. Currently, the federal government provides EV owners with nearly 90 percent of the federal tax credits. That means that high-income households are more likely to buy EVs than middle and low-income households. However, even without this government subsidy, wealthy Americans are more likely to buy electric vehicles.

A recent Treasury Department audit found that EV tax credits have helped wealthy Americans and corporations. Under a $3.5 trillion tax-and-spend package, taxpayer subsidies to wealthy households and corporations could skyrocket. This government intervention is threatening to stunt American innovation and freedom. Yet, congressional leadership and President Biden are pitching a massive spending plan, while saying it won’t hurt middle-class households.
They are ineffective climate policy

Many believe that electric vehicle subsidies are ineffective climate policies. But EVs have their own downsides. These policies are expensive and unlikely to make much of a dent in oil demand in the near future. Yet they remain popular among the “net zero” crowd, who see electrification as the answer to climate change. And while the federal government had hoped to make further provisions for EVs, a divided government has likely limited the number of new ones. So, why are EV subsidies a bad policy?

Among other problems with the federal electric vehicle subsidy program are its inability to make the electric car more affordable and more appealing to the average American. In order for EVs to be truly effective climate policy, the subsidies must become more accessible and affordable. Governments should try to make electric cars more affordable and appealing to the general population. Only then can they become more common and reduce America’s most polluting industry’s emissions.

They are wasteful

Many people question whether government subsidies for electric vehicles are wasteful. They believe the subsidies are given to those who would have purchased EVs without the assistance of government money. For instance, state and federal subsidies are typically given to consumers who treat EVs as extra cars that they rarely drive, or do not drive them often enough to make the gas savings worth the environmental cost. Therefore, government subsidies for electric vehicles are an inefficient use of taxpayer funds.

The cost of government electric vehicle subsidies is estimated at $1 trillion by 2030. The same amount of taxpayer money would be better spent on electric charging infrastructure. In fact, the proposed bipartisan infrastructure bill would include funding for charging infrastructure near Super-Users, which would help attract even more EVs. And if government subsidies are wasteful, then why do they continue to be offered? In addition to a broader view, these subsidies are often seen as a “trophy deal” that can benefit political campaigns, and they aren’t actually helping people or businesses.
They are costly

The current electric vehicle subsidy program disproportionately benefits wealthy households, with the vast majority of EV drivers earning more than $200k a year. In addition, the subsidies are costly for consumers with lower incomes, who don’t use their EVs enough to make the gas savings outweigh the cost of purchasing gasoline. But if these subsidies are to be expanded, they should remain as is. Many of these subsidies have little effect on the environment and energy markets.

The federal government’s subsidies for EVs were designed to increase the number of vehicles produced and to encourage EV sales, and most went to households that would have bought one without the tax breaks. As EV prices rose, EV subsidies shifted towards wealthy households, and this led to an increase in EV sales. But even without the subsidies, EVs still cost a premium relative to conventional fuel-efficient cars. So, how did the program benefit low-income households?

They are inequitable

While the Biden administration hopes to see 50 percent of new EV sales by 2030, the current share is less than 5 percent. In addition, EV subsidies are inequitable for lower-income households and have not gotten new EVs on the road fast enough. Lower-income households suffer from poor air quality and higher gasoline costs, and EVs could provide these households with much greater savings. Ultimately, EV subsidies should be increased, not cut.

If ZEVs aren’t subsidized, they wouldn’t replace internal combustion vehicles. Their market share would be small, and their environmental benefits would accrue only over time. While subsidies have made it easier for EVs to reach a wider range of buyers, the costs of uneconomic technologies and subsidies outweigh those benefits. Therefore, the benefits of EV subsidies are insufficient to justify the additional costs.