Are federal tax credits on electric cars effectively a subsidy to more affluent buyers?
Affluent Americans get the greatest benefits from tax credits for buying electric vehicles.
Since 2010 the U.S. government has offered a federal income tax credit of up to $7,500 for purchasers of electric vehicles. The credit is phased out after a manufacturer has sold 200,000 qualified vehicles, a threshold crossed already by General Motors and Tesla, whose vehicles no longer qualify.
A 2019 survey found tax incentives were a significant motivator among electric vehicle buyers. In 2020, 57% of new plug-in hybrid buyers and 60% of new electric vehicle buyers had incomes of at least $100,000. Though electric vehicles can save drivers in running costs, they cost more upfront than gas-powered cars—$19,000 more, on average. A 2018 study notes the "reverse Robin Hood impact" of the subsidies.
