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The Distributional Effects of US Tax Credits for Heat Pumps, Solar Panels, and Electric Vehicles

Author

Listed:
  • Severin Borenstein
  • Lucas W. Davis

Abstract

US households have received more than $47 billion in tax credits since 2006 for 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 filers. The bottom three income quintiles have received about 10 percent of all credits, while the top quintile has received about 60 percent. The most extreme is the tax credit for electric vehicles, for which the top quintile has received more than 80 percent. These patterns have changed little over time. We then present evidence on cost-effectiveness and discuss broader economic considerations.

Suggested Citation

  • Severin Borenstein & Lucas W. Davis, 2025. "The Distributional Effects of US Tax Credits for Heat Pumps, Solar Panels, and Electric Vehicles," National Tax Journal, University of Chicago Press, vol. 78(1), pages 263-288.
    • Handle: RePEc:ucp:nattax:doi:10.1086/733564
    DOI: 10.1086/733564
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    Cited by:

    1. Peter Haan & Adrián Santonja & Aleksandar Zaklan, 2025. "Effectiveness and Heterogeneous Effects of Purchase Grants for Electric Vehicles," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(1), pages 185-223, January.
    2. Redonda, Agustin & Berg, Sofia & Von Haldenwang, Christian, 2025. "Tax expenditures for environmental sustainability: international experiences in their identification and evaluation to enhance their governance," Documentos de Proyectos 82550, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. André de Palma & R. Lindsey & S. Proost & Y. Riou & A. Trannoy, "undated". "Why combating climate change is so challenging," THEMA Working Papers 2025-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    4. Dong, Zeyang & Liang, Jing & Linn, Joshua & Qiu, Yueming, 2025. "How Do Residential Greenhouse Gas Mitigation Technologies Affect Electricity Prices and Consumer Welfare?," RFF Working Paper Series 25-28, Resources for the Future.
    5. Belligoni, Sara & Trader, Elizabeth & Li, Mengjie & Rahman, Mohammad Siddiqur & Ali, Javed & Enriquez, Alejandra Rodriguez & Nagaraj, Meghana & Aksha, Sanam K. & Stevens, Kelly A. & Wahl, Thomas & Emr, 2025. "Transdisciplinary research promoting clean and resilient energy systems for socially vulnerable communities: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 213(C).
    6. A. de Palma & R. Lindsey & S. Proost & Y. Riou & A. Trannoy, 2025. "Why combating climate change is so challenging," THEMA Working Papers 2025-10, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    7. Böning, Justus & Bruninx, Kenneth & Ovaere, Marten & Pepermans, Guido & Delarue, Erik, 2025. "The effectiveness of future financial benefits on PV adoption — Evidence from Belgium," Energy Economics, Elsevier, vol. 142(C).

    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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