Taxing the Poor to Pay for Your Electric Car
Push for EV charging infrastructure is a wealth transfer from ratepayers to wealthy EV owners
Electric Vehicles are hip and happening. Media reports gush over auto manufacturer plans to transition their fleets to EV production in an alleged response to growing grassroots and public demand. When asked, hybrid and battery electric vehicle advocates and owners proudly state their love for their vehicles. But when you dig into the details, you find more to the story than just growing consumer demand.
There is no doubt that a certain portion of EV owners are simply dedicated to the technology and willingly pay a hefty price to own one. But media reports point to government policy as the “linchpin for EV adoption,” including mandates for EV use, forcing electricity consumers to pay for charging infrastructure and continued subsidies for EV manufacturers and buyers.
One problem with those policies is that they tend to benefit big auto manufacturers and relatively well-to-do EV buyers, but do so at the expense of the taxpayer. A 2017 CarMax/CleanTechnica survey clarifies the demographics of the average EV owner: 65 percent are over 40, over 70 percent are college educated, and almost 70 percent make over $75,000 per year. One other interesting statistic appears when EV owners are asked how they travel when they plan to go beyond the range of their vehicle’s batteries; 42 percent noted they “use a second car.” Ostensibly their second vehicle is fossil-fueled and, therefore, not similarly range-limited.
A recent study by TrueCar.com confirmed these demographics, reporting that the average Ford Focus Electric owner was 43 and had an annual household income of $199,000. Fiat 500e owners had an average age of 45 and household income of $145,000. John Krafcik, president of TrueCar.com noted that “[t]hese are really affluent folks” and explained that they are attracted to EVs in large part because of the deals, subsidies and rebates offered to EV buyers. Krafcik noted that looking for bargains was “in their psyche.”
And the bargains appear to be rolling in for this group because a key requirement to the broad acceptance of EVs is the dire need for far more charging infrastructure. A recent Bridge op-ed, with a headline that bluntly states Michigan’s elected officials “should boost electric vehicle markets,” confirms this reality. The authors write: “[B]oth major utility companies here in Michigan, DTE Energy and Consumers Energy, have submitted plans to the Michigan Public Service Commission for charging networks, which would increase the number of charging stations and ensure a rate structure is in place to accommodate EV drivers.”
But accommodating EV drivers means non-EV-owning people need to cover the cost of installing chargers for “really affluent folks” who want their Tesla Model 3s and Nissan Leafs topped up when they’re out and about town. To help make that a reality, the Michigan Public Service Commission, the state government authority that oversees electric utilities, approved a July 2018 rate increase for all DTE customers. That increase will force Michigan residents to pay for the $13 million the utility plans to spend on EV charging stations. In January last year, the MPSC also approved a Consumers Energy rate increase that, in part, covers the costs of a $10 million “PowerMIDrive” program to “support the growing [EV] market in Michigan.”
Among the “support” offered was a $500 rebate for each EV purchased and $5,000 rebates to install chargers in public areas. Up to $70,000 rebates would be available for installing a DC Fast Charger, which is valued for its ability to quickly charge EVs in higher traffic areas. The Commission also allowed Consumers Energy to “recover program costs over five years through a deferred accounting mechanism,” regulator- and utility-speak for “add a surcharge to everyone’s utility bill.”
Of course no one is suggesting that research and development of hybrid and battery EV technologies should cease or be held back. But many of us are quite comfortable suggesting that the regulations, subsidies and mandates forcing all Michigan residents to foot the bill for EVs are fundamentally unfair.
EV owners are willing to pay a premium to purchase their cars and they enjoy the benefits associated with owning them. It is only reasonable that they should pay the other costs associated with them — like installing charging infrastructure — as well. After all, the statistics show, pretty convincingly, that if anyone is able to cover those additional costs, it is EV owners themselves.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
MSU Report Distorts School Funding Picture
Education revenues on track, Michigan near middle of pack
A new education funding report from Michigan State University made a splash in media outlets last week. Multiple headlines and stories declared the state in a freefall of dollars dedicated to Michigan's public schools. The real story is far less dramatic and devastating. In fact, Michigan ranks near the middle nationally in per-pupil funding.
While many of the report’s claims deserve close scrutiny, two widely touted claims in particular merit further investigation. First, the study reports that Michigan’s K-12 state funding dropped by nearly 30 percent between 2003 and 2015. Second, David Arsen, the lead author of the report, found that between 1995 and 2015, Michigan had the lowest school funding growth of any state.
These claims look different when calculating them in per-pupil terms, analyzing different time periods, and using more standard approaches to adjust for inflation. A more realistic and balanced picture of education funding is more likely to guide state leaders toward sound policy decisions.
Accounting for the number of students is crucial to any meaningful education funding calculation. Michigan’s enrollment peaked in 2002-03, so some level of reduced overall funding accompanying this decline should be expected. The number of public school students dropped by 12 percent over the next dozen years, explaining a sizable share of the 28 percent decrease in funding.
Next, the MSU report builds its calculations by comparing school costs to average local and state government spending growth, rather than to the consumer price index, which is based on the change in prices of a basket of goods that school employees (who account for 80 percent or more of school spending) and other taxpayers buy. The government price deflator used in the report makes the funding trend more drastic. Much of this can be explained by the fact that Michigan was in a one-state recession for a significant portion of the time period analyzed. While governments in other states were taking in more tax revenue and expending ever more resources, Michigan’s economy was shrinking quite dramatically.
Using instead a regional consumer price index that tracks metro Detroit area price changes over time, Michigan’s total, inflation-adjusted per-pupil revenues in 2015 were less than 1 percent below what they were in 2003 — definitely not a headline-worthy finding. The federal data source used by MSU researchers left out the same comprehensive financial data that’s available through 2017. Adding in those two extra years boosts total per-pupil revenues by another 4.7 percent above the regional CPI, which puts Michigan at its own all-time high.
Data from all other states is lacking to make this comparison through 2017, but finding a different starting point in the comparison can downplay the shocking headlines significantly. Comparing per-pupil funding changes from 1994-95 or 2002-03 does land Michigan near the bottom of the states.
But coming out of the Great Recession, which left an especially deep mark on the Great Lake State, Michigan ranks right near the middle: 25th among states in the last five years of per-pupil funding growth. As of 2015, Michigan similarly stands at 24th in the amount of K-12 revenues received: $12,649 per student, less than 2 percent below the national average.
The conclusion of the MSU report closely ties together Michigan’s near-last progress on NAEP math and reading achievement with the allegation of near-last funding growth. However, the states that increased funding the most didn’t improve their test scores more than the states that didn’t boost funding as much. In fact, extra funding effort by a state doesn’t seem to have any clear relationship with its ability to boost educational outcomes. The following chart compares spending increases to test improvements on a state-by-state basis.
Six of the top 10 states that improved their average test scores on the NAEP the most were among the 11 states with the smallest funding growth. Conversely, New York made the same progress as Michigan while revenues grew by nearly $10,000 a student, a 76 percent increase in raw dollars. Michigan’s unadjusted funding growth over the period was 26 percent.
These findings mirror what a 2016 Mackinac Center analysis found on a smaller scale. Multiple years of detailed school-level data found no relationship between additional spending by a school and better results on 27 of 28 different measures of achievement. As harsh as it sounds, more money doesn’t automatically translate into better educational outcomes.
The carefully constructed pieces of the new MSU report has sought to leave a stark impression on readers’ minds that Michigan school funding has experienced a freefall and its academic achievement has suffered a result.
But a closer look at the report’s selective methods and the comparison of spending and outcomes reveals a far less disturbing diagnosis. It also undercuts the notion that accelerating funding increases will provide the needed remedy.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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