Final GOP Tax Bill Retains Tax Credits for Wind Energy, Electric Cars
Dec. 18, 2017 Christian Britschgi
Some subsidies never die.
Electric CarsTyphoonski/DreamstimeIt's hard as hell to get rid of a
government handout once it's been established. The beneficiaries,
concentrated and organized, will fight tooth and nail to keep any program
that lines their pockets. The mass of taxpayers, by contrast, have little
incentive to go to war over a few dollars off their paycheck.
Consider the congressional Republicans' tax bill. The final version of the
legislation retains tax credit programs for electric car buyers and
renewable energy producers.
This is a dramatic change from the first version of the law—the House's Tax
Cuts and Jobs Act, introduced in early November. That would have zeroed out
both the Plug-In Electric Vehicle Tax Credit and a tax credit program for
renewable energy production that is used mostly by wind farm owners.
Unsurprisingly, interest groups are cheering the preservation of the
programs. "This credit supports innovation and job creation while helping
drivers access advanced vehicle technology," announced the Electric Drive
Transportation Association. "Keeping the plug-in vehicle credit in place is
the right policy for consumers and for the nation."
The tax credit is a good deal—for makers and consumers of electric cars.
First established in 2010, the electric vehicle program awards a maximum
$7,500 tax credit to the purchasers of full electric cars; buyers of hybrid
cars get a smaller credit. The benefits of the subsidy accrue to a
vanishingly small number of predominately wealthy consumers.
Only 563,710 electric vehicles have been sold in the United States as of
2016, according to a report from the International Energy Agency (IEA). Of
these, slightly less than 300,000 are truly electric, the rest being plug-in
hybrids. California, which hands out a $2,500 tax credit for electric car
purchases in addition to the federal subsidy, has seen 83 percent of its
electric car tax credits go to people with annual incomes over $100,000,
according to a 2016 Berkeley study. The House estimated that repeal of the
tax credit, in conjunction with the repeal of several other tax credit
programs, would see federal revenues increase by $200 million by 2027.
The wind energy credit, meanwhile, costs some $3.4 billion a year. The
program was initially set to expire in 1999, but it has been perpetuated and
expanded since. The House had initially planned to shrink this tax subsidy
and speed up its phaseout, saving about $12.4 billion by 2027.
The Senate's tax bill retained both credits, and in conference it apparently
was easier to keep the money flowing than to scale it back. By concentrating
benefits and distributing costs, these programs have ensured that they'll
[© 2018 Reason Foundation]
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