The EV Tax Credit Debate Heats Up In Congress

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Electric cars have become a political flash point in the US. First Tesla and now General Motors have bumped up against the 200,000 EV sales limit built into the existing federal tax credit program when it was passed back in 2010. The purpose of the tax credit was to help manufacturers offset some of the extra costs associated with designing and building electric cars by increasing the demand for them.

EV charging
Credit: US Department of Energy

A bill has been introduced in Congress to expand the federal tax credit to the first 600,000 cars sold in the US by each manufacturer. The original credit of $7,500 would remain for the first 200,000 cars. The maximum credit would be reduced slightly to $7,000 for the remaining 400,000 vehicles and it would phase out more quickly in the end once the 600,000 maximum is reached.

A Look Behind The Curtain

Interestingly enough, the bill was introduced by Senator Debbie Stabenow of Michigan and supported by Gary Peters, Michigan’s other senator. Both are Democrats. But it is also supported by Lamar Alexander, a Republican from Tennessee. Both Michigan and Tennessee are home to automakers which manufacture electric cars. Susan Collins of Maine and Congressman Dan Kildee from Michigan are also supporters of the new legislation, which is officially known as the Driving America Forward Act.

“Ten years ago there were no mass produced electric cars on US. highways, and today, there are about one million and automakers are planning to make millions more,” Senator Alexander tells Forbes. “Investing in American research and technology for better electric vehicles is one way to help our country and the world deal with climate change. I’m glad to cosponsor this important legislation, which will encourage even more production of electric vehicles, create good jobs and boost the economy.”

Mark Reuss, president of GM, weighed in with a comment as well. “General Motors believes in an all-electric, zero-emissions future. We are dedicating significant resources and investments to manufacturing and infrastructure here in the United States to drive that vision. We appreciate the support and leadership of the Senators and Representatives; the EV tax credit provides customers with a proven incentive as we work to establish the U.S. as a leader in electrification.”

Hmmmm… GM is pretty much the tail that wags the dog in Michigan. Might it have had a hand in crafting this legislation? You decide.

Alexander is a staunch Trump supporter. Larry Kudlow, the alleged president’s chief economic advisor, has stated the tax credit will be eliminated in its entirety by 2021 if not sooner, which puts Alexander very much at odds with the official administration position on EV tax policy.

The Opposition View

The degree of enmity surrounding the tax credit idea is captured in an op-ed piece by Anton Wahlmann and published by The Street on April 10 entitled “Giving Each Electric-Car Maker a $2.8 Billion Taxpayer Subsidy Is Asinine.” The piece is subtitled, “The ‘Driving America Forward Act’ should be called the ‘Muscle Cars for Billionaires Law,’ and Trump should veto this stupid plan if it ever reaches his desk.” There’s an excellent chance that Trump will do precisely that.

Wahlmann parrots many of the talking points popular among fossil fuel advocates — no subsidies for “them,” more subsidies for “us.” Give a listen to what has gotten his knickers in a knot.

“46.8% of the 328,118 electric cars sold in America during 2018 went to drivers in just one state — California. And as anyone who’s visited California knows, electric-car sales are heavily focused in a very small number of the very wealthiest ZIP codes along the coastline, basically the San Francisco Bay Area and the Los Angeles/San Diego corridor. Drive even 20 minutes away from those places and you’re practically in Kansas as far as electric cars are concerned.

“In my view, it’s an affront to all that’s decent and rational for the rest of America to give $7,000 tax credits to people in Silicon Valley’s richest neighborhoods so they can buy themselves new toys. While the proposal’s sponsors call the bill the “Driving America Forward Act,” I think they should really dub it the “Muscle Cars for Billionaires Law.” (Full disclosure: I’m short TSLA, although I’m long GM and Fiat Chrysler.

“Is there even a limit on how many electric cars one person can buy and qualify for the $7,000 break? Or can billionaires like Mark Zuckerberg or Larry Ellison each buy 100 of them and collect $700,000 from the rest of us? Sure, let’s give rich Silicon Valley plutocrats almost a million dollars each so that they can outfit their homes with dozens of expensive electric cars. That’s the ticket!”

Wahlmann buttresses his well reasoned argument with a warning that the people who get all that lovely tax credit money will turn around and use it to support candidates who oppose the policies of the current administration and its so-called leader. Oh, the horror!

Crafting A Sensible Policy

The free market types will scream that the government should not be picking winners and losers in the commercial sector — unless, of course, it is to their benefit. Subsidies to weapons manufacturers, fossil fuel companies, and agri-business are OK because that’s what makes America great.

Small government types will scream because they want to shrink the size of government until it is small enough to drown in the bathtub — except for the military, of course, because that’s what makes America great.

Nevertheless, it is fair to ask whether the existing federal tax credit is really the best way to promote electric vehicles. Tesla is partially responsible for this because it chose to create demand for electric cars from the top down. The newest entries into the electric car sweepstakes are all from high priced brands like Audi, Jaguar, Porsche, and the like. As far the electric car revolution have come, there is still a long way to go. The vast majority of Americans still go about their daily business driving gasmombiles.

Only the most rabid ideologues would argue the federal government should not be supporting basic scientific research into battery technology and vehicle efficiency. But when it comes to promoting electric transportation, what is the best and most efficient use of public dollars?

Some have suggested the federal tax credit is a clumsy approach based more on good intentions than practicality. In the first place, not everyone qualifies for the full credit. You have to owe $7,500 in federal taxes before you get the full amount. Second, the benefit doesn’t come until many months later. If you buy an EV today, you don’t get the tax credit until you file your tax return in April, 2020. In a world where finding time to watch the next episode of NCIS Peoria is on the top of many people’s to do list, planning a year ahead is a stretch.

One idea would be for the federal government to invest taxpayer dollars in EV charging infrastructure so the old bugaboo about range anxiety could be banished forever. Another is to limit tax credits to those who earn less than a certain amount of income. Let’s be honest. Jeff Bezos doesn’t need help from the government to buy an electric car. A third option is to offer instant rebates that kick in at the time of sale. Buy it today and get your rebate today. That’s the kind of incentive that gets people’s attention.

Having A Discussion In America Today

Public discourse in America has fallen to the “Jane, you ignorant slut” level on most topics. Congress is inhabited by people who rarely speak to each other unless they are part of the correct tribe. Having an open and honest debate without slamming the opposition as a bunch of bozos or wrapping yourself in the flag is getting harder and harder to do.

If the pollution from fossil fuels wasn’t destroying the Earth’s ability to support human life, no one would care about electric transportation. But it is and we can’t wait for free market forces to work their magic, unless they will somehow have posthumous effect. So tell us, CleanTechnica readers, if you ruled the world, how would you promote electric transportation? Inquiring minds want to know.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new."

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