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The Distributional Effects of U.S. Tax Credits for Heat Pumps, Solar Panels, and Electric Vehicles

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  • Severin Borenstein
  • Lucas W. Davis

Abstract

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.

Suggested Citation

  • Severin Borenstein & Lucas W. Davis, 2024. "The Distributional Effects of U.S. Tax Credits for Heat Pumps, Solar Panels, and Electric Vehicles," NBER Working Papers 32688, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32688
    Note: EEE
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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