ABSTRACT
Desiring improved air quality and reduced carbon emissions, federal and state governments have enacted legislation that encourages widespread personal use of electric vehicles (EVs). Policymakers often use tax incentives to encourage EV adoption, and we use this rich setting to explore multijurisdictional interactions between ESG objectives and tax policy. In this paper, we critically analyze the federal and state tax implications of purchasing personal-use EVs. We show that state-level variation in the incentive structure and administration of EV tax incentives can create adverse, unintended consequences for both governments and taxpayers. Specifically, rebates on EV purchases can result in significant tax consequences, particularly for lower-income taxpayers. The unintended consequences potentially limit efficacy and undermine the stated environmental and social goals of policymakers. We conclude our analysis with key considerations for future iterations of EV adoption policy.
JEL Classifications: H23; H53; H71; K34.
