It’s not often that I write that we should thank Gavin Newsom, but now is one of those times.
It’s not often that I write that we should thank Gavin Newsom, but now is one of those times.
Gavin Newsom, California’s Democratic governor, announced on Monday that he would reinstate a tax credit for electric vehicle purchases if the incoming Trump Administration removes federal EV tax credits. But the state may not extend the credits to Tesla because of the company’s large market share. Tesla’s stock price fell 4% on Monday.
Newsom has proposed bringing back California’s Clean Vehicle Rebate Program, which ended in November 2023, if the Trump administration eliminates the $7500 credits buyers of electric vehicles get from the federal government under the Inflation Reduction Act, President Joe Biden’s signature energy law.
One of the many objections to industrial policy is the opportunity (unconnected with any economic rationale) that an essential part of it — handing out taxpayer cash — gives to politicians and bureaucrats to reward those that they favor and punish those that they do not. Given that opportunity, too many will take it, as Newsom is now demonstrating. It’s a useful reminder.
To be clear, the federal government should not be in the business of subsidizing the purchase of EVs (electric vehicles) either. While EV technology is constantly improving, EVs are no longer a new product. Either people believe that these cars are worth the price charged for them or they do not.
And if that’s true at the federal level, then that’s even more the case for any specifically Californian credits, which would be a drag on the state budget and have an even smaller effect (which is saying something) on the climate.
That Tesla is the only company manufacturing EVs in California only underlines how politicized industrial policy can be.