Carmakers haven’t given up on expanding a federal consumer tax credit for electric vehicles.
Current law, adopted in 2008, allows for a $7,500-per-vehicle tax credit for electric and plug-in hybrid vehicles — up to 200,000 vehicles per manufacturer. Once the cap is met, the subsidy is reduced every six months until it no longer exists.
But Tesla Inc. has already reached the cap — and other companies, including General Motors Co., are approaching the threshold, prompting calls from various groups to lift the cap. Opponents say the subsidies are fiscally irresponsible and benefit the wealthy.
“Arbitrary constraints with the federal credit limit consumer options and make it harder for consumers to purchase the cars they want,” Joel Levin, executive director of Plug In America, said in a statement in November. “Increased competition spurs more American innovation and technology.”
Plug in America — part of the EV Drive Coalition formed in November — is calling for the current 200,000 cap to be eliminated either through congressional legislation or as part of a large package of various tax extenders before the end of the year. The group’s members also include Tesla Inc., General Motors Co., the Center for Climate and Energy Solutions.
Bills related to the tax credit include a proposal from Rep. Peter Welch, D-Vt., that calls for removing the cap and would allow consumers to receive the full tax credit for the next ten years. Outgoing Sen. Dean Heller, R-Nev., also introduced a measure this year that would lift the cap, but would phase out the credit by 2022.
“There is a component of the Heller bill and a couple other bills that have a sunset provision and that’s something that we would be supportive of, but again, the key criteria here is extending the per-manufacturer cap beyond the 200,000,” said Trevor Francis, a spokesperson for the coalition.
But the chairman of the Senate Environment and Public Works Committee, Sen. John Barrasso, R-Wyo., introduced a bill in October that would abolish the tax credit and establish a new federal highway user fee for the vehicles.
He argued that the tax credit “largely benefits the wealthiest Americans and costs taxpayers billions of dollars.” A February study from the Pacific Research Institute found that 79 percent of those who claim the tax credit come from households with an adjusted gross annual income of more than $100,000.
“The people who buy these vehicles are wealthy people,” said Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute. “It’s not their primary car — it’s an extra car … If you could only afford one car, you wouldn’t want to depend on an electric vehicle.”
The Competitive Enterprise Institute recently joined groups including the American Energy Alliance and Americans for Tax Reform in sending a letter to Ways and Means chairman Rep. Kevin Brady, R-Texas, opposing any expansion of the tax credit.
“With no cap, however, the liability to taxpayers is almost unlimited,” the groups wrote to Brady in September. “At a time of ballooning deficits, Congress should not be piling billions more in future liabilities on our children.”
The groups also noted an American Energy Alliance survey from June which found that 67 percent of voters opposed taxpayer subsidies for electric vehicles.
American Energy Alliance, along with groups including the Competitive Enterprise Institute, sent a letter to lawmakers last week outlining their position on the tax credit, as did the EV Drive Coalition.
Francis didn’t list specific actions that the coalition plans to take before the end of the year, but said the group is “laser focused on some of the proposals in Congress” and finding a legislative solution.
“We’ve got a few more weeks, the process is going to be fast,” Francis said. “There’s a lot of different options on the table and as long as something meets our criteria, we’re going to support it.”
Ebell predicted that if a modification to the credit were to happen, it would be tucked into a broader tax extender measure rather than a standalone piece of legislation. Regardless, Ebell thinks it’s unlikely there will be any reform in December, or in the next Congress.
“I don’t think it’s going to happen, and I don’t think it’s going to happen when the Democrats take over the House either,” Ebell said.
Ebell also anticipates that the issue will become more “contentious” as electric vehicle manufacturers seek government assistance to counter a lack of consumer interest in their products.
“They’re going to be coming to the government to say ‘you’ve got to help us’ because people aren’t buying the kind of cars that the government wants people to buy and that we want to sell,” Ebell said. “I think it’s going to be a really nasty few years on this front.”
