Upward Redistribution to the 5%

In his latest Washington Post column George Will notes somewhat wryly that a considerable portion of the financial incentives of the Biden Administration’s electric vehicle (EV) tax credits like those of the Obama Administration before it are captured by the top 5% of income earners:

What the White House calls a “fact sheet” says Biden’s administration will “support market demand” for EVs by “driving demand” with “point-of-sale incentives” to encourage “deployment” of EVs. Translation: Subsidies, including tax credits for purchasers, will fiddle the market by lowering EV prices enough to manufacture a demand sufficient to justify manufacturing the vehicles in quantities that the administration says are vital for the planet. Biden even wants $15 billion to build 500,000 EV charging stations. When U.S. automobile sales exploded from 8 million vehicles on U.S. roads in 1920 to 23 million in 1930 without tax credits, the private sector, responding to real rather than synthetic demand, built sufficient gas stations.

There are tax credits of up to $7,500 for EV purchasers, until a manufacturer sells 200,000. GM and Tesla have reached this camp. GM wants the tax credit restored and made permanent. Internal Revenue Service data for 2014 showed that the biggest beneficiaries were households with adjusted gross income of at least $100,000. One percent went to households earning less than $50,000. States, too, have joined the market manipulation. In California, where about 47 percent of EVs are sold, buyers can gain up to $15,000. That such subsidies “work” is shown by what happens when they end: In 2015, when Georgia ended its $5,000 state tax credit, EV sales plummeted 89 percent in two months.

Biden’s policy to use less affluent Americans’ money to entice more affluent Americans to buy EVs is only one of the contemplated regressive policies by which his administration would transfer wealth upward. Another such policy would cancel student debts for some of the fortunate minority of Americans who, having college degrees, will likely enjoy lifetime earnings significantly higher than those of the less fortunate majority. And if Democrats repeal the $10,000 cap on deductions of state and local taxes by individuals filing their federal income taxes, this would almost entirely benefit very wealthy taxpayers.

I don’t think we should be subsidizing such purchases or “investments” at all but I also don’t be believe that we should be subsidizing oil consumption or driving which we do in thousands of ways. The maze of government subsidies are a tiger from which it is very difficult to dismount.

IMO Mr. Will is misreading the reasons for the policy. I think it’s an attempt at moving the Overton window on EVs by providing incentives to the top 5% of income earners who form the elite and the society’s opinion makers.

I’m skeptical of the assumptions being made by supporters of EVs among them that battery production can be scaled to the necessary levels. Mr. Will is right to call out the small improvements that EVs will provide but I’m not sure that the data are which he relying are up-to-date. This post on the subject suggests they may not be. I think that fans of EVs should also consider that vehicles powered by fuel cells (hydrogen) are greener than either EVs, gas-, or diesel-powered vehicles.