Electric Vehicle Tax Rebates Favor the Wealthy

David Shultz

David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.

Electric vehicle charger plugged into white electric vehicle.
Courtesy of Ivan Radic on Flickr

What do we want? Money!

When do we want it? Now!

That’s the takeaway from a new study in the journal Environmental Research Letters. In a survey of 2,170 Americans, the authors asked respondents to rate how attractive they found different financial incentives for buying a new electric vehicle. Immediate rebates—cash off sticker price, in other words—were consistently and “overwhelmingly” rated as the most attractive way for the government to subsidize purchases.


Currently in The United States, new EV buyers are eligible to receive up to $7,500 back in the form of a tax rebate. This discount is actually a piece of Obama-era legislation from 2009. President Biden attempted to expand the tax credit to $12,500 in the Build Back Better legislation but was stymied by West Virginia’s Joe Manchin, a man who has taken more money the fossil fuel industry than any other Democrat in the Senate

Seven thousand, five hundred dollars is no small sum, but, on average, survey respondents said they’d be willing to accept a lower rebate if they could have it today, to the tune of $1,400. In other words, the average respondent felt that $6,100 today was as good as $7,500 back on their taxes.

In general, the current tax rebates system was viewed more favorably by wealthier respondents—people who could afford to wait for their money and who were going to owe a lot more money when April 15th rolls around. Remember, if you owe less than $7,500 at tax time, a rebate of that size is always wasted, at least in part. “It's a pretty unequitable thing and very much favors the wealthy and people who have higher tax liabilities,” says John Helveston, a researcher at George Washington University, who co-authored the study.

In addition to perhaps contributing to this sort of financial inequality, the current tax rebate system also means the government is overpaying for the effect they’re generating. If $6,100 today is considered on par with $7,500 at tax time to the average EV buyer, the government could’ve saved $2 billion between 2011 and 2019 by giving out less money more immediately. Or—even better—the program could’ve had a significantly larger effect for the same cost.

The argument—and Helveston says he gets this all the time—is that EV manufacturers would simply raise their prices to account for the immediate rebate, effectively nullifying the benefit to consumers. Helveston says it’s certainly possible that the manufacturers and the dealers would capture a bit of the value from an immediate rebate, but he doesn’t think it’s quite so simple. “These cars are more expensive to start with. They're hard to sell,” he says. “If you put this thing on the lot at a higher price, you're not going to sell that car. The consumers just going to say ‘no.’”

Helveston says that the rebate system might actually make EVs more attractive to dealers in the long run. Dealers have historically been lukewarm on EVs because they don’t require oil changes or a lot of other routine maintenance that internal combustion engines need, meaning dealers see reduced long term revenue from the sale. If some of the rebate value winds up going to the dealer and allows them to sell expensive cars a bit more easily, Helveston says it might help accelerate EV adoption even further. “The dealers have just been completely ignored, but they're actually a pretty serious gatekeeper,” he says.

If American politics shows anything, however, it’s that just because a policy makes sense, doesn’t mean it’s easy to enact. A change to the federal EV tax rebate policy would have to come from Congress, and as long as Joe Manchin continues to protect the interests of the fossil fuel industry, this remains unlikely. However, all is not lost! “That doesn't mean you can't make an impact today,” says Helveston. “At the state level, there's a lot more flexibility.”

The Nation Conference of State Legislatures has a nice roundup of the state-by-state EV incentives on offer, which gives an idea of how wildly variable this landscape is. California has 15 different programs in place that offer benefits ranging from financing for installing an EV charger on your property to an $800 rebate for residential customers purchasing an electric vehicle. West Virginia only has one. Kentucky, Kansas and North Dakota have zero. Check out what’s on offer in your state and see if it persuades you to think electric for your next purchase.

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David Shultz

David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.

The Capitol at Sunset
Courtesy of Mike Stoll via Unsplash

Over the weekend Senate Democrats officially passed the Inflation Reduction Act in what amounts to President Biden’s biggest legislative win so far. The bill includes a host of broad-spectrum economic policy changes and completely reworks the subsidies for electric vehicle purchases. The law still has to get through The House, but this should be a much smaller hurdle.

dot.LA covered the bill in depth as it neared the goal line at the end of July, and the final iteration doesn’t change much. To recap:

1.The rebate total stays $7,500 but is broken into two $3,750 chunks tied to how much of the car and its battery are made in the US.

2.The manufacturer caps are eliminated, meaning even EV companies that have sold more than 20,000 vehicles are once again eligible.

3.Rebates will now only apply to cars priced below $55,000 and trucks/SUVs below $80,000

With the new system placing a renewed emphasis on American manufacturing and assembly, the calculus of which vehicles cost how much is still being worked out, but the most comprehensive list I’ve seen has come from reddit user u/Mad691.

In addition to the EV rebate program, the bill also includes a number of economic incentives aimed at curbing emissions and accelerating the country’s transition to electric vehicles.

There’s $20 billion earmarked for the construction of new clean vehicle manufacturing facilities and $3 billion will go help electrify the USPS delivery fleet. Another $3 billion will go to electrifying the nation’s ports. Then there’s $1 billion for zero-emission trucks and buses.

Now that the bill is about to be codified into law, VC investment in the sector might heat up in response to the new money flowing in. “I do anticipate more climate funds standing up to invest in EV infrastructure,” says Taj Ahmad Eldridge, a partner at Include Ventures and the Director at CREST an ARES Foundation initiative with JFF/WRI that aims to provide training for people in the new green economy. “However, we do see funds being a little more thoughtful on diligence and taking their time to fund the right investment.”

The sentiment seems similar across Southern California. ChargeNet CEO and Co-Founder Tosh Dutt says the Inflation Reduction Act “super charges” the company’s effort to build infrastructure across the country.

“This investment accelerates the transition to renewable energy and gives companies like ChargeNet Stations the confidence to expand more rapidly, especially in underserved communities,” says Dutt.

For Rivian, the bill’s passage has left would-be customers in a sort of limbo. Because many of their models will exceed the $80,000 cap for trucks and SUVs after options, customers who’ve preordered are scrambling to sign buyers’ agreements to take advantage of the current EV rebate scheme which doesn’t include price caps. As I noted in the previous article, if you buy an EV before the bill is signed, you’re eligible for the current rebate system even if the vehicle isn’t delivered until 2023. Any existing contracts under the current system will remain valid.

With the legislation seemingly on the fast track to become law, it’s unclear whether or not Rivian will expedite the purchasing process to allow customers to sign the buyers’ agreement before the new rebate program becomes the law of the land. Tick tock!


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