Time to End $7,500 Electric Car Tax Credit

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Kelly photoPennsylvania Congressman, Mike Kelly, wants to end the $7,500 tax credit that affluent purchasers of electric vehicles are currently taking advantage of. The most hyped of these vehicles has been General Motors' Chevy Volt, but other plug-in cars, like Fiskers and Teslas, sell for close to $100,000 and make a strong case for Rep. Kelly's argument.

Let's look past the recent Chevy Volt fires. The value of a vehicle will be determined by the consumer. It does not matter if Jay Leno and other rich purchasers say they love their Volts. The real questions are, should taxpayers be paying the wealthy to purchase cars like the Volt, and what, exactly, are the taxpayers getting for their money?

GM has stated that the buyers (other than federally subsidized townships and crony corporation GE) of Chevy Volts have an average annual income of $175,000 and are more affluent than the average American. The Volt sells for over $40,000 so that would seem obvious, but it's good to see GM finally giving an honest statement. It is even more obvious that buyers who can afford Fiskers and Teslas are not really in need of a taxpayer handout of $7,500 so that they can enjoy a new toy. Even President Obama says the wealthy should be paying their fair share, so why continue to promote a tax credit that redistributes taxpayer funds from average Americans to rich buyers of EVs? And if wealthy purchasers of cars like the Volt love the car as much as they claim, wouldn't they buy the car without a $7,500 subsidy? It is time for those that promote the policy to give firm evidence that the EV subsidy is money well-spent.

Billions of taxpayer dollars have already been spent to promote the Volt and cars like it. Michigancapitolconfidential.com reports that one analyst puts the taxpayer cost at up to $250,000 per each Volt sold. Apologists for the Volt contest the number and argue that the total subsidies to date are "only" $1,500,000,000 and if spread over the next year would equal "only" about $30,000 per vehicle. Obviously, this defense is ludicrous as the total costs to taxpayers continues to climb as the wealthy purchasers receive subsidies for each additional Volt sold. Hypothetically, if the per vehicle cost goes down with the denominator rising by 50,000 (as assumed) the total cost to taxpayers would climb by another 375 million dollars due to the EV subsidies. In any case, it is more important now to debate the value of the $7,500 EV subsidy rather than debate what the per vehicle cost to taxpayers will be.

Let's look at some of the hypothetical numbers and what the $7,500 EV subsidy alone has and will cost Americans. If just 10,000 of the approximate 15,000 who purchased EVs thus far this year get the credit, the cost to taxpayers for the subsidy would be $75 million. That doesn't include the illegitimate claims for the credit that are sure to come. Over the next few years, if we get to Obama's goal of a million EVs on the road and only 400,000 of those get the tax credit the cost to taxpayers for the subsidy goes to $3 billion. The most important question that hasn't been answered is, what are taxpayers getting for the money?

Claims have been made that cars like the Chevy Volt are the future and are necessary to lessen foreign oil dependence while saving our environment. Unfortunately, the taxpayers who are footing the bill haven't been given any evidence of how this is true. Instead, there has been an arrogant assumption by Volt apologists and supporters of EV development that this is the case, and if you dispute it you are a right wing Luddite.

Here are some stats to consider when weighing the value of EVs' contribution to lessening oil consumption. Estimates for the number of EVs on US roads in 10 years have a wide range, but a goal of 6 million of the vehicles seems to be obtainable, if a little optimistic based on recent growth rates. So let's use that number and estimate total passenger vehicles on the road in 10 years at 300 million. Passenger vehicles account for 40% to 45% of total US oil consumption. Now do the math. For a total cost of what could be tens of billions of dollars the payoff in 10 years is a reduction of oil consumption of less than 1%. And this costly approach to lessening foreign oil dependence comes from the folks that don't want to drill for new oil because it would take a few years to get the oil to market!

Such a small reduction in oil use can not possibly benefit the environment significantly. Add the fact that lithium-ion batteries have a negative environmental impact (as well as the impact of increasing coal-powered electricity consumption) and the case for EVs saving our planet also is disproved. For some reason, the supposedly intellectual elitists who serve as apologists for the Chevy Volt and all EVs have never come up with projections or credible studies on the benefits of pursuing the electrification of America's auto fleet. Many of the proponents are college professors; a scary thought considering that our children are being educated by those that present ideological opinions as facts without substantiation.

Rep. Kelly is right; we should end the $7,500 EV tax credit for the wealthy that offers very little benefit to average Americans. It would be great to see facts presented as to the supposed benefits of costly EV initiatives instead of attempts to discredit those that question the wisdom of spending billions of dollars that America can no longer afford to spend on wasteful green initiatives that benefit only cronies of the politicians that support those same initiatives. Green bloggers, left leaning ideologues, and GM shills are all encouraged to give some hard facts the next time they claim that taxpayer-funded EV development is an undisputed strategy that will greatly lessen our country's dependence on foreign oil while saving the environment.

Mark Modica is an NLPC Associate Fellow.