Subsidies are like powerfully addictive drugs: once started, they are a difficult habit to kick.
Electric vehicles are the darlings of the automobile industry. In addition to Tesla, all of the traditional automakers — both here and abroad — have been pouring billions of dollars into developing new EVs while slowly abandoning the production of gasoline-powered vehicles. But while EVs may be innovative technological marvels, old-fashioned subsidies continue to drive the industry.
The federal government provides a tax credit to EV purchasers of $7,500 for the first 200,000 vehicles sold by any individual manufacturer. Once an EV manufacturer reaches that sales milestone, the tax credit is gradually decreased over the subsequent 15 or so months.
Individual states have sweetened the subsidy pot further, offering rebates up to $5,000, along with subsidies for installing home and business charging stations, subsidies for installing home and business solar panels, "free" charging stations along major highways, and even preferred access to carpool lanes. And just to make sure EVs are adopted, some states have implemented mandates that require increasing percentages of new vehicles sold to be EVs.
Jonathan A. Lesser, PhD, is an adjunct fellow at the Manhattan Institute and the president of Continental Economics, an economic litigation and consulting firm. This piece was adapted from Economics21.