Electric Car Subsidies are on the Chopping Block

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Electric car subsidies started way back in 1992 when there weren’t many choices and these cars were a novelty. Charging stations weren’t the common sight they are today and if you told someone you had an electric car, then they’d probably look at you funny. Today, electric cars are commonplace and one Senator says it’s time to end the subsidies.

Republican Senator John Barrasso of Wyoming thinks the current system is outdated given the popularity of electric vehicles. Today’s subsidies let consumers take a tax credit until an automaker sells 200,000 units, at which time the credits quickly decrease and then disappear completely. Barrasso wants them to disappear right now.

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The Senator wrote an op-ed piece for Investor’s Business Daily detailing his reasoning. Not only does he think taxpayers have paid enough in funding subsidies to help get the electric car market moving, he also thinks people buying these cars aren’t paying their fair share to maintain our roads.

Let’s take a look at the first part of his argument. The idea behind the subsidies was to encourage people to buy electric cars and to create a market that didn’t exist. In 1992, there weren’t a lot of choices nor was there an infrastructure. People needed a good reason to go electric and the subsidies helped.

Even today, federal subsidies help make electric cars affordable. But, as Barrasso points out, there are also state subsidies in places and other incentives that make owning an electric car appealing. He reasons this is enough to keep things rolling and removing the federal subsidies won’t hurt sales.

As for the road maintenance, that part is all about the U.S. Highway Trust Fund, which maintains bridges and interstate highways. It gets its funding through a gas tax. If you drive an electric, then you’re not using gas and paying this tax, but you’re still driving on those bridges and highways.

His solution there is to come up with a fee for those who drive electric vehicles. That money would go right into the highway fund, ensuring electric car owners pay their fair share of highway maintenance costs.

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It’s true electric vehicles aren’t the anomalies they once were, but those tax credits still figure into vehicle affordability. Suddenly removing them will put these cars out of reach for those on a budget. Some people can handle the extra cost, but others won’t have a choice.

Adding in a user fee for the highway fund further reduces the appeal of electric vehicles. Although some buy electric solely for the reduced environmental impact, there are plenty who buy them for the gas savings. Removing the subsidy and adding a fee also removes much of that savings.

Electric cars are growing in popularity, but there’s no way to know if that growth will continue if the financial incentives disappear.


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