Taxpayer-Funded Incentives to Buy EVs Hit $2 Billion This Year, Treasury Says

An electric vehicle charges at a mall parking lot in Torrance, Calif., on Feb. 23. Patrick T. Fallon/AFP via Getty Images

The U.S. Department of Treasury has announced that over $2 billion in taxpayer-funded electric vehicle (EV) tax credits have been provided to consumers since the beginning of the year, as part of the Biden administration’s electrification push.

The subsidies, delivered as tax credits of up to $7,500 for new EVs and $4,000 for used models, have played a role in the purchase of over 300,000 battery-electric, plug-in hybrid, and fuel-cell vehicles so far this year, according to an Oct. 1 statement from the Treasury Department.

Introduced by the Inflation Reduction Act, the subsidies, which took effect this year, allow tax credits to be applied at the point of sale instead of when filing taxes. Treasury cited research indicating that consumers overwhelmingly prefer this immediate rebate option, as it reduces the initial purchase price.

According to Treasury Secretary Janet Yellen, the initiative is helping to lower transportation costs and shield consumers from volatile gasoline prices.

“Consumers will save an average of $21,000 on fuel and maintenance over the lifetime of their vehicles,” Yellen said in a statement, describing the subsidy as “saving Americans more than $2 billion since January.”

To qualify for the tax credit, consumers must confirm that their income is below the set thresholds at the time of purchase, according to the Internal Revenue Service (IRS). The income cap is set at $300,000 for married couples filing jointly and $150,000 for individuals. If claimants exceed these limits, they are required to repay the government when filing their taxes.

While the program is a key element of the Biden administration’s climate strategy, it has sparked criticism for disproportionately benefiting wealthier households, raising concerns about the fairness of the policy.

EJ Antoni, a research fellow at the Grover M. Hermann Center, and Anthony Esposito, director of U.S. equity execution at Scotia Capital (USA), said in an op-ed published by The Heritage Foundation in November 2023 that taxpayer-funded EV tax credits amount to “subsidizing rich electric-vehicle owners” to the tune of billions of dollars.

“This is socialism for the rich: a transfer of costs from higher net-worth individuals to middle- and lower-income taxpayers,” they said, comparing tax credits to levying taxes on less affluent public transportation users or those who commute by bicycle in order to subsidize gasoline costs for wealthier car owners.”

Additionally, a study by the Texas Public Policy Foundation said that various subsidies and regulatory credits artificially lower the price of EVs, making them appear cheaper than they are.

The study said that subsidies and credits total nearly $50,000 per EV over a decade, with these costs shouldered by taxpayers and utility ratepayers as EV chargers put significant pressure on the electric grid. According to the foundation, electric vehicles receive nearly seven times more regulatory credits than they provide in actual fuel economy benefits, forcing automakers to prioritize EV production when consumer demand is insufficient.

The Texas study suggests that this overemphasis on EV production, driven by regulatory incentives, could lead to economic inefficiencies and push automakers toward financial instability, as they are pressured to meet stringent government mandates despite lagging consumer interest.