The Electric Vehicle Tax Credit For The Wealthy Is Up For Extension

The electric vehicle (EV) tax credit is reaching an end as companies like GM and Tesla reach the 200,000-car limit built into the credit.

Now, as more and more car manufacturers begin creeping toward the 200,000-car threshold, a battle has ensued at the U.S. capitol on whether to extend it further.

Although the main players – the car manufacturers looking to extend the credit and the oil and gas industries looking to kill it –  going toe-to-toe in Washington D.C. will get most of the attention, the discussion on extending the electric vehicle tax credit should revolve around one simple question: should low and middle-income taxpayers be subsidizing high-income earners for purchasing an electric vehicle that they could likely afford without the credit?

With the incredibly high cost of an electric car, it’s no surprise that the 67 percent of American households in 2017 with an electric vehicle made $100,000 per year or more – with 42 percent making $150,000 or more.

An article originally published in RealClearEnergy noted the following:

[E]lectric vehicle buyers were the beneficiaries of $4.7 billion between 2011 and 2017; absent a repeal, the Joint Committee on Taxation (JCT) projects that figure to total $7.5 billion between FY2018 and FY2022 alone.

If 2017 percentages of electric vehicle ownership were similar from 2011 to 2017, over $3.1 billion worth of subsidies went into households earning more than $100,000 per year, and another $5 billion is projected in the coming years.

Interestingly, this billions of dollars’ worth of tax breaks has done very little to make electric vehicles popular in the states – in 2017, battery electric vehicles accounted for merely .6 percent of all vehicles sales, calling into question the effectiveness of a tax credit costing taxpayers billions of dollars and functioning much like a redistribution program for the rich.

The below article was originally published by Dino Grandoni in the Washington Post, detailing the current situation over the tax credit extension in Washington:

General Motors, Tesla and a fleet of other car manufacturers are going into overdrive to extend a tax break that has for a decade helped sustain the sale of cars that need little to no gasoline to run.

But in that effort, there is a roadblock: Oil and natural gas companies, which supply the gas fueling the internal-combustion engines dominating American roadways and which oppose extending tax breaks for vehicles that don’t use their fuel.

This has triggered an intense lobbying battle on Capitol Hill between two powerful and traditionally closely linked industries, Steven Mufson and I report.

Oil and gas companies, said electric car proponent Rep. Daniel Kildee (D-Mich.), “prefer a world where every vehicle spews greenhouse gases, and this is not the world that I’m trying to encourage.”

But opponents, in their own blitz of studies, op-eds and meetings with lawmakers, are emphasizing what they see as the economic downsides of the tax credit. They say extending the credit would be unfair to middle- and lower-class consumers unable to afford electric cars. And they’re making inroads with their own Republican allies.

“Regardless of whether you support the tax credit for electric vehicles or not, there is no denying taxpayers are overwhelmingly subsidizing Americans that can afford to buy their own car,” said Sen. John Barrasso (R-Wyo.), chairman of the Senate Environment and Public Works Committee who has proposed legislation to wipe out the tax credit.

Here’s how the program now works: The federal government provides a tax credit of $7,500 to buyers for the first 200,000 electric vehicles sold by each company. After a manufacturer sells that first tranche, the tax credit drops by half for cars sold over the next six months — then by half again for another six months before disappearing entirely.

The reason the issue is coming to a head now: Two major auto companies, Tesla and GM, have already crashed into the 200,000-car threshold. And several more, including Nissan and Ford, will likely run into the same problem in the coming years.

Kildee, along with Sen. Debbie Stabenow (D-Mich.), sponsored legislation to raise that ceiling so companies would be able to sell three times as many electric vehicles before the tax credits, originally offered as a lifeline after the 2008 financial crisis, start to run out.

Stabenow and Kildee crafted their bill for months in consultation with major automakers. Not only does the legislation have the backing of the powerful Alliance of Automobile Manufacturers, which represents a dozen automakers including GM, it also has the support of several major environmental and public health groups. They include the Sierra Club and the American Lung Association, as well as the Edison Electric Institute, which represents the investor-owned electric utilities that would help power the plug-in cars.

It also, crucially, has the backing of two Senate Republicans, Susan Collins of Maine and Lamar Alexander of Tennessee.

But Derrick Morgan, senior vice president of the American Fuel and Petrochemical Manufacturers, said he has “met with dozens and dozens” of lawmakers to highlight the high cost of the tax break. The trade association, which represents refiners, worked with Ernst & Young to calculate that lawmakers’ plan to extend the tax break bill could cost the federal government $15.7 billion over 10 years. By comparison, the Joint Committee on Taxation estimates the government will spend $7.5 billion on the current credit between fiscal years 2018 and 2022.

“We have nothing against electric vehicles,” Morgan said. “Our thing is that we would like to have an even playing field.”

Right now, Stabenow is trying to figure out how to get the tax credit extension into a must-pass piece of legislation — possibly one introduced earlier this year by Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, and Sen. Ron Wyden (Ore.), the ranking Democrat on the committee, that extended a variety of tax provisions.

Stabenow, who sits on that committee’s task force for examining energy tax credits, wants to persuade Grassley to include the credits. His spokesman would not comment on the issue.

All tax legislation, however, must originate in the House. The fact that a majority of Democrats on the Ways and Means Committee has sponsored Kildee’s electric-vehicle bill seems to bode well for credit supporters.