the Golden State Warriors, who won three of the last four NBA
championships, signed All-Star Demarcus Cousins, sports pundits
across the country offered the same opinion: The rich just got
many respects, the same holds true for energy subsidies.
energy programs promise ambiguous policy goals such as abating
climate change, spurring innovation, or reducing dependence on
foreign sources of energy. But they often lead to situations that
help the rich at the expense of middle- and lower-income
Americans. That’s because when the federal government gets
involved in the energy business, it transfers billions of dollars
to the production and consumption of politically preferred sources
and technologies—and many of those involve the poor transferring
money to the rich.
instance, a recent study by the Pacific Research Institute found
that more than 99 percent of subsidies for electrical vehicles go
to households with incomes of $50,000 or higher, and nearly
three-quarters go to households with an annual income of $100,000
Americans can’t access the $7,500 tax credits because of the high
prices of electric vehicles, even after accounting for the
generous subsidies, which means they help pay for the subsidies
through their taxes but can’t themselves get eligible for the
subsidies or other benefits, such as carpool lanes.
make matters worse, some major car companies are forced to sell
electric vehicles at a loss to comply with state mandates and
regulations. As Wayne Winegarden of the Pacific Research Institute
along with the nine states that have adopted California’s
policy, mandates that zero-emission vehicles (ZEVs) comprise a
set percentage of the automobile market. The mandated minimum
market share for ZEVs is currently scheduled to grow from 4.5
percent of sales in 2018, to 22 percent of the market by 2025;
and Gov. Jerry Brown is even contemplating a complete ban on
sales of cars with internal combustion engines after 2040.
with these mandates requires companies to maintain ZEV credits
that equal their share of the mandate, based on the company’s
specific sales. Acquiring sufficient credits requires
manufacturers that do not sell enough ZEVs to either sell ZEVs
in California at a loss, purchase credits from companies whose
ZEV sales exceed their credit requirements, or pay a $5,000 fine
per credit that the company is short.
the sales mandate has become a subsidy to companies, such as
Tesla, that sell more ZEV-qualified vehicles than required by
the mandate; and, a penalty on companies whose ZEV sales fall
short of the required mandate. The $700 million earned by Tesla
via these credit sales, which does not even account for all the
credits Tesla has amassed, exemplifies that these subsidies and
penalties can be substantial.
subsidies benefit not only wealthy individuals, but also wealthy
companies in the form of blatant corporate welfare. The federal
government’s loan guarantee program is another subsidy program
where government-backed loans have, time and again, gone to
companies that simply don’t need any support from the taxpayer.
don’t have to scratch too far beneath the surface to see that some
of these projects have financial backing
from giant tech firms, massive energy utilities, large investment
banks, and other successful corporations.
Department of Energy’s Advanced Technology Vehicles Manufacturing
program granted more than $1 billion in loans for Nissan and Ford
to retool their factories. This program is simply a transfer of
wealth from taxpayers to these massive companies. These companies
should have no trouble financing a project without
government-backed loans if they find it is worth the investment.
favoritism in markets will benefit all Americans—individuals and
businesses alike—not just the privileged few.