Who Gains from the Electric Car Tax Benefit?

Electric car tax benefits may seem like a green initiative to improve the world. Strange though this may sound, such an impression is actually far from accurate. When we look into the details of these benefits, we can see that the people who benefit the most are high earners.ElectricCarTax

Let’s take a look at why this is the case.

The Numbers

60% of the $18 billion delivered in clean energy tax benefits went to the people earning six figures a year between the years of 2006 and 2012. Only 10% of these tax credits went to families earning under $75,000 per year.

While this includes a variety of green tax breaks, the biggest proportion were those involving electric cars.

Why Did this Happen?

There are many reasons why this may happen. The reality is electric cars are expensive and only wealthier households can afford to buy them new. The used car market isn’t yet prominent enough to allow low income households to fully participate.

Hence, by its very nature, the electric car tax break is geared toward higher income households.

Does this Represent a Fundamental Flaw?

On the face of it, this is just another tax cut for the rich. Nevertheless, expect it to get better. Electric cars continue to decline in price. As the technology improves, there is a high chance that this will all change in the coming years. People can expect to see tax credits extended to a greater number of people as this sector becomes more affordable for the poor and middle classes.

Image credit: Frank Hebbert

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johnAbout john
Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Huddleston Tax CPAs of Seattle & Bellevue
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Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Seatac, Mercer Island, West Seattle, Auburn, Snohomish and Mukilteo. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Tawni Berg, CPA, Jennifer Zhou, CPA, Jessica Chisholm, CPA or Chuck McClure, CPA. Member WSCPA.