Energy Wealth Redistribution

Your tax dollars at work. Exposed by UC Berkeley, yet. This is the Abstract from their working paper The Distributional Effects of U.S. Clean Energy Tax Credits [emphasis added]:

Since 2006, US households have received more than $18 billion in federal income tax credits for weatherizing their homes, installing solar panels, buying hybrid and electric vehicles, and other “clean energy” investments. We use tax return data to examine the socioeconomic characteristics of program recipients. We find that these tax expenditures have gone predominantly to higher-income Americans. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the program aimed at electric vehicles, where we find that the top income quintile has received about 90% of all credits. By comparing to previous work on the distributional consequences of pricing greenhouse gas emissions, we conclude that tax credits are likely to be much less attractive on distributional grounds than market mechanisms to reduce GHGs.

Of course, the top quintile aren’t only the cronies; they’re also the folks rich enough to install these things and/or buy the expensive battery-operated cars—which are horribly expensive, even after the “tax credits,” and in the case of those solar panels, have payback periods measured in generations rather than years.

From the body of the paper [citation omitted]:

If these tax credits are successful in inducing changes in behavior, then we should expect to see increased purchases during years in which the subsidies are particularly generous. Conversely, if credits do not induce additional sales, then the primary effect is just to transfer rents to participants in transactions that would have taken place anyway.

In other words, if there are no additional sales, then the sales that would have occurred anyway would see wealth redistribution from the lower income strata to the higher income strata in addition to the basic price paid for the goody bought.

How did that work out? Taking, for example, hybrid car sales,

There does not appear to be much of a decrease in hybrid sales when the AMVC [Alternative Motor Vehicle (Tax) Credit] was ended for all hybrids at the end of 2010. Moreover, since 2010, hybrid sales have increased significantly without the benefit of the AMVC.


From the paper’s conclusion:

Since 2006, these credits have provided more than $18 billion in subsidies for households who make clean energy investments. Using rich data from tax returns we show that over the last decade US clean energy tax credits have gone predominantly to higher-income Americans. Taxpayers with AGI in excess of $75,000 have received about 60% of all credit dollars aimed at energy-efficiency, residential solar, and hybrid vehicles, and about 90% of all credit dollars aimed at electric cars.

Again, hmm….

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