GOP Tax Plan Puts Electric Car Tax Credits On The Chopping Block


The Republican Party is desperate to find ways to make rich people richer. It’s what they do. Among the many proposals contained in its latest tax plan is one that would end the $7,500 federal electric car tax credit program. The current policy applies to the first 200,000 electric vehicles produced by each manufacturer. After that, the credit begins to phase out. At present, Tesla and General Motors are closest to 200,000 car limit.

electric car

Part of the reason to end the incentive is to pay lip service to the oft repeated Republican mantra that government should not pick winners and losers in the marketplace. In theory, the government didn’t pay the Wright Brothers to create the airplane which led to the airline industry so why should it do so for other industries? If people have a new idea, let them test it in the crucible of the free market. If it succeeds, great. A new industry is born, jobs are created and society benefits. If it fails, someone loses a ton of money but c’est la vie. Time to move on.

The problem with the Republican narrative is that it is a lie. Governments lavishes billions of dollars on business every year. The state of Wisconsin, which holds itself out as a shining example of pure conservative ideals, will fork over up to $3 billion to Foxconn to build a factory there. Nevada has agreed to give Tesla millions in tax breaks to build its Gigafactory. The interstate highway system has been the greatest engine for economic change in the history of the United States and every mile was paid for by federal funds.

The fossil fuel industry receives billions in subsidies from the federal government every year. Defense contractors are paid more billions to produce weapons that don’t work. That “winners and losers” line is nothing more than a way for Republicans to reward their friends and punish their enemies while appearing to be guided by bedrock conservative policies.

What impact will repealing the federal electric car tax credit have on the EV market? The experience of Georgia offers some insight. At one time, it had the highest EV tax credit of any state. Sales of electric cars boomed. Then the Georgia legislature repealed the tax credit. EV sales plummeted. Something similar happened in Denmark when it boosted taxes on electric cars.

People vote with their wallets. The desire to purchase the mostest with the leastest is what drives commerce. Walmart has become one of the world’s largest retailers by focusing on low prices. Despite the fact that battery costs — the most expensive part of any electric car — have fallen precipitously over the past few years, electric cars still cost more than their gasoline powered equivalents. Faced with a $10,000 difference, many shoppers shy away from purchasing an electric car.

“Tax credits are an important customer benefit that can help accelerate the acceptance of electric vehicles,” GM spokesperson Laura Toole said in an email to The Verge. “Because General Motors believes in an all-electric future, we will work with Congress to explore ways to maintain this incentive.”

There is a legitimate debate about whether tax credits are the most efficient way to promote the transition to electric cars. Perhaps the money used for credits or rebates could be better spent building charging infrastructure so electric car drivers don’t have to feel they are pioneers searching in a vast wilderness for a place to plug in.

But the Republicans in Congress  have not seen fit to suggest another path to promote the adoption of electric cars. They are simply interested in finding a trillion and half dollars somewhere — anywhere — so they can give it to their wealthy patrons who pay to get them elected. The whole process is the nothing more than corruption on a national scale.

China, Europe, India and other countries are firmly committed to the electric car revolution. China has the largest new car market in the world, which means any manufacturer with intentions of competing on the world stage will need to build electric cars to survive. Axing the federal tax credit in the US will save some money, but absent some alternative strategy to encourage electric car sales, it is just another example of present day America turning its back on the rest of the world.

Rather than engaging with other countries, America is isolating itself from its neighbors. The result can only be a nation that is less competitive with fewer manufacturing jobs for American workers. America must choose whether to be a leader or a follower. Leadership is expensive but the lack of it will prove to be far more costly.

About the Author

I have been a car nut since the days when Rob Walker and Henry N. Manney, III graced the pages of Road & Track. Today, I use my trusty Miata for TSD rallies and occasional track days at Lime Rock and Watkins Glen. If it moves on wheels, I’m interested in it. Please follow me on Google + and Twitter.

  • kevin mccune

    Most Republicans seem to hate EVs, because you know , there is nothing like stinking your hands up while putting in a “full tank of freedom “.

    • curly4

      I don’t know about you but most republicans don’t get gasoline on their hands when filling the gas tank.

      • kevin mccune

        I am talking about the dirty stinking dispenser nozzles( when I can find full service I usually go for it, don’t mind paying a few cents more per gallon, letting someone else foul their hands up) BTW , if I happen to let a little spurt out of the the tank filler it usually coats my gas cap and I get the stinking petrol , ethanol blend on my hands.
        IMO its not a privilege to get nasty carcinogenic chemicals on my hands or the nasty germs from the other people who were probably picking their nose or who knows what .
        Next time you fill up ,smell your hand where you were grasping the nozzle .( just saying )

        • curly4

          Then a few more cents to reduce the carbon foot print you wouldn’t mind paying either I assume.

          • kevin mccune

            No, I drive a vehicle that doesn’t consume that much petrol and I am not a “roadrunner”‘

    • curly4

      BTW, kevin mccune, Texas, a republican state, has invested much in wind power. Drive across West Texas and there are row after row of those big wind generators. I have check the numbers of generators installed but it probably as great as any other state.

      • kevin mccune

        Some people are happy about them , the fruitbats and luddites blocked them around here, something to do with the viewshed , now they are trying to block a natural gas pipeline .

  • Paul Mendes

    Well, like you Steve, I’m in RI. So RI killed their $2,500 credit, and now the Federal Government wants to kill the $7,500 credit. It’s making my Model 3 $10,000 more expensive for me, which really stings the wallet.

  • curly4

    The Republican Party is desperate to find ways to make rich people richer. . . .
    Well, it seems to me that to remove the tax credits would cause fewer cars to be sold making the rich owner of the car manufacturing to become poorer and not richer. Fewer cars sold less dollars in the bank account.

  • Jim Smith

    All tax credits should be eliminated as they do nothing but distort markets.

    • kevin mccune

      I agree conditionally .

  • rcbryan

    Too much at stake for US car companies to let the GOP house bill pass. Don’t forget the world is going electric even if we choose to stick our head in the tar-sand.
    The EV credits are self eliminating anyway.. only applies to first 200k e-cars sold by the company, then fades to zero over next year.
    If the fed want money back, there is far more available in getting rid of fossil fuel subsidies..

  • Lynne Whelden

    I think it’s fair to say (speaking for myself, the owner of the Prius Prime) the majority of people who presently buy plug-ins or pure electric cars…..don’t need a nice fat tax credit. We can afford the pricey cars.

  • Stu Heli

    Maybe a carbon tax on fossil fuels would balance the playing field?

  • Matjaž Ciglar

    Excellent news – at least for me. I am from EU so I will get my model 3 earlier!
    As I am expecting some reservations to be cancelled in US