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 Then the Georgia legislature repealed the tax credit.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.

 

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.