The Rich Are Getting Most of the EV Subsidies

A new study by economists at the University of California Berkeley has highlighted a fact that many observers had already suspected: The vast majority of electric vehicle tax credits are being paid to the country’s wealthiest households.

Using data from U.S. federal income tax filings the study, ”The Distributional Effects of U.S. Clean Energy Tax Credits” stated that households with adjusted gross incomes in the top 10% receive about 60% of the EV subsidies. “For whatever reasons, electric cars are just not attractive to lower income households,” Lucas Davis, an associate professor at the Haas School of Business at UC Berkeley, told Design News. “Right now, they’re kind of a niche product.”

The UC Berkeley findings are consistent with previous profiles of electric vehicle purchasers. Earlier this year, TrueCar.com stated that buyers of the Ford Focus EV had an average family income of $199,000 a year, whereas buyers of the gas-burning Focus averaged $77,000 a year. Similarly, buyers of the Fiat 500e electric car earned $145,000, while gasoline-burning Fiat 500 owners came in at $73,000.

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According to a 2012 study published in The New York Times, the top tenth of U.S. household incomes start at $140,001. The top 5% begin at $188,001.

The new UC Berkeley study comes at a time when at least two major automakers are working hard to drive down the cost of electric vehicles. General Motors and Tesla Motors both hope to release long-range, sub-$40,000 battery-powered cars in 2017.

EV proponents have long asserted that subsidies will help grow the market, enabling economies of scale to take hold and costs to drop. In that sense, the wealthy are doing their part by driving production volume, they argue.

One of the key suggestions of the UC Berkeley study, however, is that a carbon tax might be a more equitable way of encouraging carbon reduction. That way, wealthy consumers would pay, rather than receiving a subsidy. “We understand that subsidies are politically easier to work with than taxes,” said Davis, who co-authored the study with UC Berkeley professor, Severin Borenstein. “But it looks like this preference for subsidies is coming at a real cost.”

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Senior technical editor Chuck Murray has been writing about technology for 31 years. He joined Design News in 1987, and has covered electronics, automation, fluid power, and autos.

[image via ponsulak / FreeDigitalPhotos.net]