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Federal Tax Credit is a Transfer of Wealth from the Poor to the Rich.

Federal Tax Credit is a Transfer of Wealth from the Poor to the Rich.

I wasn’t able to find anything on the Tesla Forum discussing this topic. A harsh accusation leveled against EV owners is that the $7500 federal tax credit is a form of wealth transfer, a subsidy for the rich, another way that poor people are made to pay for the expensive tastes of the rich, downright unfair, etc, etc.

I’m at a loss as to how to refute this, since I for one, am very happy about the all the federal tax credits I’ve received from having purchased Teslas.

What does one say to all these aggrieved ICE vehicle owners? How does one argue against such an emotionally trenchant point that is tightly bound up with our ideas about money?

dmm1240 | 5 février 2019

A tax credit is a tax reduction. It's a tax you would pay but don't in a given year. Poorer taxpayers are NOT subsidizing you. Federal revenues go down, but you are not receiving money from the poor. You simply don't pay as many dollars in taxes is all.

Yodrak. | 5 février 2019

"Federal revenues go down, but you are not receiving money from the poor."

I agree, there is no transfer of wealth. There is an increase in the national debt, same as for many other un- or under-funded government programs. They say that future generations will eventually have to pay that debt, but that's another subject.

SCCRENDO | 5 février 2019

It is falling away so it will save explanation. Yes it does help those who pay more than $7500 in taxes.. If the government was serious about promoting EV use they would offer everyone a rebate. California does this and in fact limits the rebate to below certain income thresholds.

TeslaTap.com | 5 février 2019

I'd also state the poor don't pay any taxes - so no transfer of wealth. The poor do benefit from cleaner air and lower gas prices as gas consumption is lowered by more EVs being sold. So the poor get something out of it too.

TranzNDance | 5 février 2019

The rich are paying for the R&D and ramping up of production of vehicles that don't contribute to pollution of the air, which everybody has to breathe, but shouldn't have to.

TranzNDance | 5 février 2019

I meant people shouldn't have to breathe polluted air.

avesraggiana | 5 février 2019

Excellent points, people.

About the only thing I could come up with my feet mired in tar was that the Federal Government has been subsidizing our own domestic auto industry in one way or another for years, and years and years.

Can't back it up with a link, but it sounded good in the moment.

carlk | 5 février 2019

"Wealth from the poor"?

And have you heard a thing called charity for rich to feed back to the poor poor?

TranzNDance | 5 février 2019

The credit is a carrot to encourage desirable behavior. One stick tactic would be to increase taxes on sources of pollution to discourage undesirable behavior, but people would probably be upset about that.

jordanrichard | 5 février 2019

Well to whoever is telling you that, ask them this simple question, is every home owner a “rich” person.......? Because as home owners you get deductions that apartment dwellers don’t. Home owners get tax credits for energy efficient home improvements like new windows. Ask them if F-150 truck owners are “rich” because if the truck was bought for a business, they get to deducted the entire cost of the truck.

tew ms us | 6 février 2019

Hmmm. Looking at it this way, all those rich people who are moaning about the limitation of the deduction for state/local taxes have nothing to complain about - there's no wealth transfer from them to the federal purse.

DanFoster1 | 6 février 2019

The subsidies for the entire fossil fuel system are orders of magnitude larger; those subsidies support the mine and burn model; they support oil cartels, profound corruption and exploitation; they contribute to pollution and the wholesale destruction of the ecosystem etc. etc. Unlike EV subsidies, there is no plan to phase them out.

SO | 6 février 2019

Don’t forget the child tax credit.

TranzNDance | 6 février 2019

Mortgage interest deduction for those mansions.

stevenmaifert | 6 février 2019

There is no wealth transfer because the EV tax credit is not a refundable credit. You don't get back more than you owe. On the other hand, the Earned Income Credit is a refundable credit and is a wealth transfer from those who pay Federal Income taxes to those who do not.

Tropopause | 6 février 2019

Wish they'd just get rid of the whole process, it's served its purpose.

sschaem | 6 février 2019

The poor dont pay any direct taxes. The issue is then, the $7500 (on 200K car) or 1.5 billion doesn't go to other government programs that benefit the poor ? (Reality is, the goverment doesn't wait for taxes to spend. if they want money they borrow it... and the debt fall right back on WORKING america that pay taxes. the poor never pay anything)

Also we give about 4 billion a year to places like Pakistan ... so how about people look at the place where our 4.4+ trillion budget can be optimized. the government offering 1.5 billion (over 10 years) is nothing like the money we give to south and central america EVERY year.

Also, the tax credit in the case of tesla benefit the US big time in term of job creation and supporting a dominant world wide EV player.

The taxes Tesla will pay on the exported car it makes will DWARF the 1.5 billion the US government did not receive in the past 10 years. About 150m a year... its insignificant loss for billion in yearly upcoming gains.

SCCRENDO | 6 février 2019

@sschaem. Quite a concocted explanation but I agree with you that Tesla deserves a tax credit. Although perhaps for different reasons. Because of climate change Tesla is a key player in ameliorating the problem. Thus we should provide incentives to get everyone into EVs like Tesla and get rid of the fossil fuel subsidies.

carlk | 6 février 2019

TranzNDance
***The credit is a carrot to encourage desirable behavior. One stick tactic would be to increase taxes on sources of pollution to discourage undesirable behavior, but people would probably be upset about that.***

That would be the cabon tax. It is the best way to do it and could be made revenue neutral too.

TranzNDance | 6 février 2019

I don't think climate change deniers would understand nor accept a carbon tax. At least pollution is something they can see or smell without any scientific knowledge.

jerrykham | 6 février 2019

I'm just laughing that the people who came up with that are calling me "rich".

jordanrichard | 6 février 2019

BTW ask those people what is the definition of “rich”. In some parts of the country what I paid for my car would buy a house, while in other parts it would be just a down payment on a house.

SCCRENDO | 6 février 2019

@jordanrichard. I am not sure what part of California you are thinking about but the price of a car would get you a down payment on a house with iron bars on the windows.

DTsea | 6 février 2019

There is a reduction in xfer of wealth from rich to poor to subsidize a choice the government wants to encourage. Thats it.

jimglas | 7 février 2019

troll flagged

jordanrichard | 7 février 2019

SCCRENDO, that is exactly my point. "Rich/wealthy" is relative. So before people start crying about things "going to the rich", they need to first define what that is. I will venture to guess that those crying about the "rich" getting all the breaks, are perceived as "rich" themselves by others.

TranzNDance | 7 février 2019

I like Chris Rock's comparison of rich and wealthy. "Shaq is rich," he said, referring to the Los Angeles Lakers' Shaquille O'Neal, "but the white man who signs his check is wealthy."

bp | 8 février 2019

As more EVs enter the market, if the government intent is to encourage a shift from ICEs to EVs, instead of providing a tax credit for purchasing EVs, they should charge a tax on purchasing an ICE, with the tax rate based on EPA ratings - so that purchasing vehicles with the poorest fuel economy would be taxed more than purchasing an energy efficient vehicle.

And then use the money raised to pay for incentives for adding more renewable energies, such as solar power for homes and businesses.

While the tax credit was helpful to close the price gap between early EVs and ICEs - adding an ICE tax may have a much larger effect in accelerating the transition to EVs, and would help pay for renewable energy.

Yodrak. | 8 février 2019

"if the government intent is to encourage a shift from ICEs to EVs"

That's not the [federal] government's intent as long as Trump, or some other Republican, is President.

Mel. | 9 février 2019

Yodrak,
So why did Bush start this Tax Credit?

Yodrak. | 9 février 2019

That was then, this is now. And Bush was not the driver behind the tax credit. The bill that Bush signed originated in a Democratically led Senate that included a whole lot more than the EV tax credit. It was a three-part bill, the primary component of which was the Emergency Economic Stabilization Act of 2008. You do recall that the country was in a bit of economic turmoil at the time?

The other two parts were the Energy Improvement and Extension Act of 2008 and the Tax Extenders and Alternative Minimum Tax Relief Act of 2008.

The EV tax credit was a very small add-on to a a very large package intended to get the country out of a major economic depression. That's why Bush signed the bill.

Al1 | 10 février 2019

The tax credit should be considered against dozens of billions directly given to carmakers in support of their promised electrification efforts. Looking at current state of electric vehicle production at GM, Ford and Fiat as well as their plans for future those billions went directly down the drain.

It's a good thing when buyer can vote with his wallet which car he wants to buy.

TranzNDance | 10 février 2019

Except in places where buyers can't easily vote with their wallets because dealers blocked Tesla's ability to sell cars directly.

Pepperidge | 10 février 2019

It is "less money transfer" from richer to poorer.

David N | 11 février 2019

@avesraggiana
“A harsh accusation leveled against EV owners is that the $7500 federal tax credit is a form of wealth transfer, a subsidy for the rich, another way that poor people are made to pay for the expensive tastes of the rich, downright unfair, “
A bunch of mumbo jumbo coming from those who have no clue what their talking about. I call it snowflake talk.
How are “poor people” who don’t pay taxes subsidizing the rich?
Proof is on the one making the claim.
Why is this geared towards Tesla owners?
Don’t Owners of less expensive EV’s have the same opportunity for the tax breaks? I’m not sure I’d classify all owners of Nissan Leafs to be “expensive tastes of the rich”.
Just a case of those who are unhappy with where they are in life, so they blame others instead of doing something to improve themselves or being thankful for what they do have. They are crybabies, whiners.
If poor people were really that poor, why do they all have large flat screen TV’s, cell phones, cars, etc...,
I guess we should define what people mean by
“ poor “.

docdac | 11 février 2019

I thoroughly enjoyed receiving the $7500 tax credit twice (12/2012 and 3/2016), but it absolutely was not a factor in whether or when I bought my cars. In the case of Tesla MS and MS, it is probably an unnecessary incentive/subsidy for purchase of a very expensive car in a high percentage of cases (though certainly not all). However, I agree that it is an effective incentive for the purchase of less expensive cars like the M3 and Leaf.

docdac | 11 février 2019

MS and MX

TranzNDance | 11 février 2019

While rich people don't necessarily need the cash, they have options that most people do not have. They could buy another luxury vehicle and continue to pollute the air. Since the target was to move to cleaner air, the government had the means to nudge people to cleaner cars. The large sticker price that the rich paid helped to fund the continued R&D to make BEV an affordable option for more people.

DTsea | 11 février 2019

David N has it right. Nobody elses taxes were raised when the tax credit was put into effect.

cpomnc | 18 février 2019

The 7500 tax credit was only about half of that in my case.I was told I make to much money. That is not true in less social security and a meger Military retirement is considered rich.