Over the last two decades, U.S. households have received $47 billion in tax credits for buying heat pumps, solar panels, electric vehicles, and other “clean energy” technologies. Using information from tax returns, we show that these tax credits have gone predominantly to higher-income households. 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 tax credit for electric vehicles, for which the top quintile has received more than 80% of all credits. The concentration of tax credits among high-income filers is relatively constant over time, though we do find a slight broadening for the electric vehicle credit since 2018. The paper then turns to the related question of cost effectiveness, examining how clean energy technology adoption has changed over time and discussing some of the broader economic considerations for this type of tax credit.
Authors
- Acknowledgements & Disclosure
- We are grateful to seminar participants at UC Irvine and UC Berkeley for helpful comments. This paper is under preparation for the March 2025 National Tax Journal Forum “Tax and Environmental Policy”. We have not received any financial compensation for this project nor do we have any financial relationships that relate to this research. The analysis relies entirely on publicly-available data and all data and code will be posted on our websites upon completion of the project. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w32688
- Pages
- 50
- Published in
- United States of America
Table of Contents
- NBER WORKING PAPER SERIES 1
- THE DISTRIBUTIONAL EFFECTS OF U.S. TAX CREDITS FOR HEAT PUMPS SOLAR PANELS AND ELECTRIC VEHICLES 1
- Severin Borenstein Lucas W. Davis 1
- Working Paper 32688 httpwww.nber.orgpapersw32688 1
- NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge MA 02138 July 2024 1
- The Distributional Effects of U.S. Tax Credits for Heat Pumps Solar Panels and Electric Vehicles Severin Borenstein and Lucas W. Davis NBER Working Paper No. 32688 July 2024 JEL No. H23Q42Q58 2
- Severin Borenstein Haas School of Business University of California Berkeley Berkeley CA 94720-1900 and NBER severinborensteinberkeley.edu 2
- Lucas W. Davis Haas School of Business University of California Berkeley CA 94720-1900 and NBER ldavishaas.berkeley.edu 2
- 1 Introduction 3
- 2 Background 6
- 2.1 Energy Efficiency 6
- 2.2 Residential Solar 9
- 2.3 Electric Vehicles 10
- 2.4 Other Related Credits 12
- 3 Distributional Analysis 13
- 3.1 Data Description 13
- 3.2 Summary of Total Tax Expenditures 16
- 3.3 Average Credit Per Return 17
- 3.4 Concentration Curves 19
- 3.5 Concentration Indexes 21
- 3.6 Additional Results and Limitations 23
- 4 Adoption Behavior 25
- 4.1 Heat Pump Shipments 26
- 4.2 Residential Solar Installations 28
- 4.3 Electric Vehicle Sales 30
- 5 Conclusion 31
- References 43
- Residential Energy Credits 48
- Electric Vehicle Credits 48
- Residential Energy Credits 49
- Electric Vehicle Credits 49
