Five details on the Dem plan to subsidize electric vehicles for the wealthy

The following article was written by Mike Palicz from Americans for Tax Reform.

Democrats on the House Ways and Means committee voted last week to advance their section of the $3.5 trillion blowout, including $42.5 billion in taxpayer-funded subsidies for the electric vehicle industry.

Included in the plan is a massive expansion of the individual tax credit for electric vehicles (EVs) set to cost taxpayers nearly $17 billion while disproportionately benefiting wealthy individuals in blue states.

1) Taxpayers would pay up to $12,500 in subsidies for the cost of a new EV

Section 136401 of Subtitle F would create a refundable tax credit up $12,500 for the purchase of a new electric vehicle. Individuals with gross incomes up to $400,000 and joint filers up to $800,000 can claim the full credit. The credit phases out by $200 for each $1,000 exceeding these income levels. The Joint Committee on Taxation estimates that this provision alone would cost more than $15.5 billion.

Democrats would allow the tax credit to apply to EVs with a manufacturer’s suggested retail price well within the range of luxury vehicles. The EV tax credit could be claimed on:

  • Sedans up to $55,000
  • Vans up to $64,000
  • SUV up to $69,000
  • Pick Up Trucks up to $74,000

2) Handout for Union Bosses

The full amount of the tax credit comes with a special handout for organized labor – $4,500 of the maximum $12,500 credit can only be claimed by individuals if the vehicle purchased is assembled in a U.S. facility operating under a union-negotiated collective bargaining agreement. This is a naked handout to a Democrat preferred special interest

Here it is, straight from the bill’s text:

“In the case of a new qualified plug-in vehicle which satisfies the domestic assembly qualifications, the amount determined under this paragraph is $4,500.”

“The term ‘domestic assembly qualifications’ means, with respect to any new qualified plug-in electric vehicle, that the final assembly of such vehicle occurs at a plant, factory, or other place which is operating under a collective bargaining agreement negotiated by an employee organization.”

3) Overwhelmingly benefits the wealthy in blue states

Data from JCT reveals EV subsidies overwhelmingly benefit the rich. More than 83 percent of current EV credits claimed go to tax filers with an annual income of $100,000 or more. Taxpayers with an annual income exceeding $1 million account for 8 percent of all credits claimed. This should come as no surprise given the sticker price of a new electric vehicle typically ranges from $40,000 – $80,000. Subsidizing luxury cars is targeted welfare for the wealthy.

Furthermore, EV subsidies primarily benefit Democrat-run states. Eight of the top ten states for EV sales are states represented by two Democrat Senators. Of the 250,000 all-electric vehicles  sold in the U.S.s in 2020, according to data from the Alliance for Automotive Innovation, Californians alone accounted for over 93,000 EVs purchases. For comparison, West Virginia had only 195 EVs registered in 2020. 

4) Lifts the 200,000 vehicles per manufacturer cap

The bill also does away with an important taxpayer protection in current law that phases out the current EV tax credit once a manufacturer sells 200,000 vehicles. This “cap” was put in place to ensure the tax credit supports an emerging technology rather than become a permanent subsidy. Democrats would now remove this safeguard, allowing individuals to claim the credit in perpetuity. 

5) New $2,500 subsidy for used EVs

The bill would also create a new tax credit capped at $2,500 for qualifying used EVs. This means taxpayers could be on the hook for up to $15,000 in payments on the same EV during the vehicle’s lifespan. The used EV tax credit is estimated to cost taxpayers an additional $1.3 billion.

To be eligible, vehicles must be purchased from a car dealership, cannot exceed a sales price of $25,000 and must be a model year at least 2 years earlier than the sale date. The credit is limited to individual buyers with an income up to $75,000 and $150,000 for married couples filing jointly.