Saving Energy Should Be Its Own Reward

The New York Times headline (in its paper edition), “State-by-State Assault on Electric Cars,” presents an image of people smashing windshields, throwing stones, or overturning vehicles. Instead, the article is about the debate over tax breaks to purchasers of electric cars.

According to the Times, electric cars couldn’t exist without tax breaks. Georgia had a $5,000 tax break on electric vehicles and in its last month 1,300 such cars were sold. In the month after it was repealed, sales declined to less than 100. (The paper doesn’t say so, but knowing that the tax break was disappearing probably led more people to buy in the last month.) The article makes it clear that supporters of electric cars, and the Times itself, believe that they are entitled to such tax breaks.

The Antiplanner has encountered similar attitudes during discussions of mileage-based user fees. Oregon, which is experimenting with such fees, says that, “Unlike semi-trucks, the impact on roads created by regular cars and light trucks–from small compacts to large pickups—is practically the same across the board.” (Oregon already has a mileage-based fee for all heavy trucks.) Some people are outraged by this, taking it for granted that cars that get better gas mileage or run off of electricity should get a break.

That might make sense if the state were charging user fees for energy usage. But it’s not; nor is charging just for road damage. Instead, it’s charging for road usage, and all cars use about the same amount of space when they are on the highway. You get charged for energy when you buy gasoline, Diesel, propane, electricity, or whatever is your fuel of choice. If you have a Prius or Tesla, you save money because it uses less gas, so there is no need for a double-reward in the form of a tax break.

Despite significant federal and state tax breaks for electric vehicles, less than 600,000 electric cars have been sold in the United States since 2008. That represents less than a quarter percent of the 260 million passenger vehicles in this country. This suggests that the tax breaks haven’t been very effective in saving energy.

It would be far more effective to encourage people who are buying some of the 18 million new cars sold each year, most of which are powered by gasoline, to buy cars that are a little more fuel efficient. If 20 percent of new-car buyers buy cars that are 20 percent more fuel efficient, they would save more petroleum than doubling the number of electric cars. On the other hand, they would also save 20 percent on their fuel bills, so they probably don’t need a tax break to encourage them to do that.

Electric cars aren’t necessary green in any case because most electricity in the United States comes from burning fossil fuels. While more renewable sources of electricity are coming on line (thanks to other tax breaks), it makes sense to devote that energy to existing electricity consumers rather than to create a bunch of new sources of consumption.

The Times disapprovingly quoted the Antiplanner’s faithful ally, Amy Cooke, who argues that (in Colorado at least) the tax breaks take money from funds that would otherwise be spent repairing roads and bridges and gives it to “rich guys.”

What it really comes down to is that electric vehicles so far can’t really complete with gasoline vehicles on price or range between refueling, so manufacturers want the tax breaks to make their businesses even marginally viable. So the breaks are really going to the electric auto makers, not to protect the environment. Does Elon Musk really need more tax breaks?


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