California will increase rebates for electric vehicles if President-elect Donald Trump eliminates the $7,500 tax credit, Gov. Gavin Newsom says.
California had a zero-emission vehicle rebate from 2010 to 2023. It began with a direct rebate of $5,000 for battery electric vehicles, which eventually increased to $7,500.
Critics have already argued that California's budget is tight and adding more spending isn't ideal. California is nonpartisan Finance and political officer recently warned that the state budget doesn’t have the capability for brand spanking new commitments.
Q: Should California offer its own electric vehicle rebate if the federal tax credit goes away?
James Hamilton, UC San Diego
NO: A $7,500 subsidy would cut back the fee of an electrical automotive by 15%, which may lead to a 15% increase within the number of electrical cars sold. That implies that for each $7,500 California would pay to get someone to change to electric cars, we can be paying $50,000 in subsidies to individuals who would have bought an electrical automotive anyway. Most of those buyers are wealthier than the common Californian. We should promote electric cars, but the prices outweigh the advantages here.
Norm Miller, University of San Diego
NO: While I benefited from each federal tax credits and California rebates in 2012, I don't think it is smart for a single state to try to switch demand-stimulating tax credits or to select and select amongst industry competitors who deserves help and who doesn't. I would favor that our government(s) support primary and sometimes dangerous research in university labs to advance the cutting-edge, but not pick winners or distort market demand.
David Ely, San Diego State University
NO: The latest fiscal outlook report from the Legislative Analyst Office finds the 2025-26 budget is roughly balanced, due partially to tax revenue growth driven by the stock rally relatively than the strength of the general economy. As a result, the budget lacks the capability to fund latest programs reminiscent of a revived federal rebate program. Even a rebate program that excludes popular Tesla vehicles, just like the one the governor is considering, could have limited impact on electric vehicle purchases.
Caroline Freund, UC San Diego School of Global Policy and Strategy
NO:Electric vehicle tax credits are an expensive and unfair strategy to reduce emissions. The profit primarily advantages wealthier residents who can afford latest cars and have access to charging stations. Taxing fuel (and carbon emissions more generally) and redistributing revenue to essentially the most vulnerable can be more efficient and revenue-neutral. Given the big budget deficit, offering a California-only rebate for electric vehicles can be particularly problematic now. To the extent that the goal is to create jobs, there isn’t any guarantee that those jobs can be local.
Kelly Cunningham, San Diego Institute for Economic Research
NO: Subsidies impose disproportionate costs on lower-income consumers to be able to profit higher-income users. Electric vehicles needs to be feasible without requiring taxpayers to subsidize wealthy users who can afford the prices. Zero-emission vehicles are only as clean as the facility sources they’re connected to. The increase is predicted to exceed emissions from newer combustion engine vehicles. In any case, California, already facing double-digit operating deficits, is unable to soak up additional costs in the approaching years.
Alan Gin, University of San Diego
YES: The marketplace for electric vehicles is important and can remain so in the longer term. The electric vehicle tax credit is essential to maintaining competition on this market. The $7,500 discount has allowed other manufacturers to capture Tesla's market share, and eliminating the discount will allow Tesla to proceed its dominance. For this reason, Elon Musk believes that eliminating the discount can be a long-term profit for the corporate, even when it could have a negative impact on sales within the short term.
Chris Van Gorder, Scripps Health
NO: Last time I checked, California had a budget deficit and expects to have one other deficit next yr. This deficit resulted within the state not funding programs that were significantly more necessary to the general public good than providing reimbursement for the acquisition of an electrical vehicle. I imagine it can be crucial to prioritize using taxpayer dollars by specializing in current health and public safety needs reminiscent of health care, mental health, public safety, education and homelessness.
Jamie Moraga, Franklin Revere
NO: While I support rebates and credits for electric vehicles, I don't support them if the state budget can't afford it. California remains to be attempting to dig itself out of its $165 billion debacle starting in 2022. Adding in last month's budget outlook report released by the Legislative Analyst's Office, even the speaker of the California Legislature emphasized the necessity for fiscal restraint and warned against expanding programs or services in preparation for possible economic challenges. Now just isn’t the time to supply discounts.
Phil Blair, Manpower
YES: The environment may be very necessary to Californians. As the biggest economy within the United States, we must also do our part to support the problems we imagine in, despite the ultra-conservative initiatives of the incoming administration.
Gary London, London Moeder Advisors
NO: I’m an admitted hypocrite for receiving these tax credits. But since California plans to transition to electric cars by 2035, these cars can be purchased without tax credits. The larger incentive can be that the fee of those vehicles would fall. But that’s a tariff debate for an additional day. I like to recommend that the state deal with incentives to convert gas stations to electric stations, as refueling is the larger barrier.
Bob Rauch, RA Rauch & Associates
NO: California's economy has been experiencing a downturn for nearly two years. Inflation and sluggish private employment growth have led to weak consumer spending. Outside of presidency and health care, the state has not created any jobs within the last 1 1/2 years. High taxes, increased minimum wage and climate regulations, and other progressive policies have contributed to California's economic woes and left the state budget unable to accommodate latest commitments.
Haney Hong, San Diego County Taxpayers Association.
NO: California has already intervened in the electrical vehicle market starting in 2035, requiring all latest electric vehicles to be electric by then. So a government credit for electric vehicles is just overkill. And if California has money to spend—which, by the best way, it really doesn't—then why shouldn't we just put money into things that may profit everyone: relief from electricity and water rates, road repairs, or maintenance of public facilities?
Not participating this week:
Austin Neudecker, Weave Growth
Ray Major, economist
Originally published:
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