Who Gets Green Energy Money

Yesterday Steven Hayward posted a story at Power Line about a Haas School of Business at the University of California at Berkeley study showing who gets the tax credits associated with green energy. The results of the study are not surprising, but provide another example of excessive government spending helping people who really don’t need help.

The article reports:

Since 2006, U.S. 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.

Logically this is not surprising. Lower income people are not likely to pay the extra money for an electric car (or have a charging station). Lower income people are less likely to own their own home. People on welfare have no incentive to reduce their energy bills–welfare is paying for them. On the other side of the equation, most upper income people are in the habit of taking advantage of any ‘free’ money offered to them. Many upper income people have financial advisers who are paid to follow government tax programs and rebate programs. Upper income people may also have the money on hand to do the capital improvements required to get the tax credits, lower income people may not. Generally speaking I favor tax credits, lower taxes, etc., but I resent the fact that the tax code is used to control behavior–that is why it is so long. It really is time to build a tax code with two or three deductions that everyone can understand and that results in everyone paying some taxes. We all need skin in the game so that when our legislators start giving money away to people who do not need it, everyone will complain,.