The Clean Energy Tax Credit Scam------90% Of Electric Car Subsidy Goes To Affluent Taxpayers

In an effort to decrease the amount of greenhouse gas emissions, the U.S. government offers federal income tax credits to taxpayers who invest in lower-greenhouse gas alternatives. Since 2006, these "clean energy" tax credits have cost $18 billion.

  • High-income taxpayers (annual gross income of more than $75,000) received 60 percent of tax credits in programs for energy-efficiency, residential solar power, and hybrid vehicles.
  • High-income taxpayers (annual gross income of more than $75,000) received 90 percent of tax credits in programs for electric cars.

Distributional patterns indicate that higher-income taxpayers are more likely to claim credits and claim them for larger amounts. Additionally, many energy tax credits are not available to lower-income taxpayers. For example, the Residential Energy Efficient Property Credit (REEPC) offers a 30 percent credit for all installed residential solar panels, solar water heating systems and fuel cells up to a maximum of $2,000. This generous tax credit is not an option for renters, only for property owners.

When considering future incentives to U.S. taxpayers for eco-friendly investments, policy makers would do well to turn their support away from tax credits over to a carbon tax which would be equally distributed across all income brackets.

Source:  Severin Borenstein and Lucas Davis, "The Distributional Effects of U.S. Clean Energy Tax Credits," Energy Institute at HAAS, July 2015.

For more on Tax and Spending Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=25

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