Electric vehicle tax credit increases the deficit without decreasing emissions – $74 million

A federal income tax credit created to encourage the purchases of electric vehicles will have “little or no impact on the total gasoline use and greenhouse gas emissions of the nation’s vehicle fleet” in coming years, according to an analysis by the nonpartisan Congressional Budget Office (CBO). Through 2019, the credit may cost taxpayers $2 billion, including $74 million this year. So while the new tax credit will increase the deficit, it will most likely do little if anything to decrease emissions. CBO projects there may be benefits but is unsure how cost-effective they would be.

The CBO also found the credit has a limited impact on electric car sales. “CBO estimates that about 30 percent of current and future sales will be attributable to the tax credits, and 70 percent would have occurred even without the credits.”

The CBO noted the incentive may “effectively subsidize the release of additional greenhouse gas emissions” in some situations. For example, a person may buy an electric car instead of a traditional hybrid and live in an area where electricity is generated by coal-fired power plants. In that case, “more emissions are released per mile traveled on electric power than per mile traveled on gasoline.”