Archive for August 1st, 2017

A knock I hear frequently about electric vehicles (EVs) is that they require government subsidies to sell well rather than letting the “free market” decide. I’m assuming “free market” refers to dealer network and government collusion and externality benefits of petrol fueled vehicles. However, I usually have to distinguish between a tax credit (which is NOT a subsidy) and a tax rebate (which is a subsidy). The federal tax credit afforded to EV owners is often (incorrectly) labeled a “subsidy” by anti-EV folks. However, the federal tax credit for an EV purchase is limited to the buyer’s federal tax burden.

If you have no federal taxes, Uncle Sam does not cut you a check for $7,500. If you only have $5,000 federal taxes owed at the end of the year, you also don’t get a $2,500; you just don’t have to pay the $5,000 in federal taxes. In short, it’s you keeping more of your own money (which is why it’s called a tax incentive) rather than you getting someone else’s money (which is why it’s NOT a subsidy).

State issued tax rebates are subsidies. Not having to pay for the health problems caused by driving a petrol powered car is a subsidy.