California and the IRS want to buy you an electric car

Did you know you can receive up to $12,500 from the IRS and California FTB if you buy a qualifying electric vehicle?

The IRS currently offers a tax credit of up to $7,500 for qualifying electric and plug-in hybrid vehicles. Details about what purchases qualify and for how much can be found at this website: http://www.fueleconomy.gov/feg/taxcenter.shtml. (Note that many of the credits discussed at this page for hybrids and other alternative fuel vehicles ended Dec. 31, 2010.)

California is willing to throw in another $5,000 for purchases of qualifying vehicles. Of course, the list of qualifying vehicles and steps you must take to claim the credit are not the same for California and Federal purposes, so you’ll have to do your research and fill out various forms twice. But $12,500 isn’t a bad return for jumping through some bureaucratic hoops. Details on the California credit can be found here: https://energycenter.org/index.php/incentive-programs/clean-vehicle-rebate-project. It should be noted that the credit in California is only available on a first-come-first-served basis until the funding runs out. You must apply for the credit after you’ve purchased your vehicle (but before filing your tax return…way before), so you’ll probably need to purchase your vehicle and apply for the credit early in the year.

This raises the question in my mind as to whether the government should be offering so much money to people who buy electric vehicles. Don’t get me wrong, I think anybody who qualifies for these credits should claim anything they’re eligible for. But in the big picture, is this good policy? Considering the high sticker price on many electric cars (especially the Tesla Roadster, which can run into six figures!), I’m guessing the typical electric car buyer is probably fairly affluent. Does this represent an unfair benefit to those who are already doing better financially than most Americans? And there’s the question of whether it’s a good idea for the government to distort the market by offering these additional incentives. The argument is often made whenever the government subsidizes something that products that can’t support themselves without subsidies shouldn’t be produced.

On the other hand, there is a long history in America and most developed nations of government providing support for new technologies to get these things off the ground. For example, the first computers cost a fortune, were hideously slow by modern standards, and probably wouldn’t exist without government buying them up for various defense applications and storing massive volumes of data that only government needed to deal with. Countless other technologies such as the Internet, satellites (for both communications and GPS), and even radio communication probably wouldn’t exist, or would exist in far more rudimentary form, if government hadn’t provided considerable subsidies for these products early on. If America doesn’t provide subsidies for new technologies to meet our transportation needs, undoubtedly other countries will support these technologies at the government level. If these technologies experience the same success as computers, satellites, and other major technologies, America will have a lot of catching up to do.

So what do you think? Does it make sense to provide these large subsidies to electric vehicles? (This is my first poll in WordPress…we’ll see how this goes.)

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One Response to California and the IRS want to buy you an electric car

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