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Brooks Wilson's Economics Blog: Subsidizing the Rich?

Thursday, July 29, 2010

Subsidizing the Rich?

The Chevrolet Volt and Nissan Leaf will hit consumer markets this fall.  Chevrolet is projecting the sale of 10,000 vehicles which will have a sticker price of $41,000 while Nissan is projecting the sale of 30,000 vehicles which will have a sticker price of $32,780.  The Volt can travel 40 miles on batteries and will then rely on a gasoline generator to power the electric engine to extend its range to 380 miles per tank of gasoline.  The Leaf can travel 100 miles on batteries and has no additional power source. 

Hoping to promote the sale of battery powered vehicles that the federal government sees as a replacement for the carbon burning internal combustion engine the government is subsidizing their sale with federal tax credit that can reach $7,500 per vehicle.  Even with the subsidy, the price of the vehicles will probably limit sales to upper middle income buyers wishing to make an environmental statement.  Do we really need to subsidize relatively wealth Americans who buy the new government endorsed technology?  (See Peter Whoriskey, The Washington Post, "GM Volt's price induces some sticker shock" for details.)

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