Coalition Mounts Last-Ditch Effort to Stop Extension of EV Tax Credit

The Tesla Model S electric car at the 2010 North American International Auto Show in Detroit, Mich., Jan. 12, 2010. (STAN HONDA/AFP via Getty Images)

WASHINGTON—Nearly 50 percent of the value of federal electric vehicle (EV) tax credits has been claimed by Californians, according to a coalition of advocacy groups that’s pushing Senate Republicans to defeat the Democrats’ Green New Deal proposal to extend and expand the subsidy.

“Democrats have made expanding the electric vehicle subsidy a top priority before Congress wraps up for the year. This move would essentially enrich two auto companies, General Motors and Tesla, along with wealthy coastal elites, mainly from California and New York,” American Energy Alliance (AEA) President Thomas Pyle said in a Dec. 10 statement.

“History has proven that lawmakers tend to cut awful deals before rushing out for the holidays. This year is shaping up to be no different …

“It’s now up to the Republicans in the U.S. Senate to stop the madness. No deals, no extensions,” Pyle said.

“Senate Majority Leader Mitch McConnell [R-Ky.] and his Senate GOP colleagues must protect consumers and taxpayers by eliminating the electric vehicle tax credit once and for all. At the very least, they must block the proposed expansion of this welfare program for the wealthy.”

Pyle’s group, which leads the coalition of 33 like-minded advocacy organizations, claims 46 percent of all individuals taking advantage of the credit are Californians in high income-tax brackets.

First approved in 2008, the plug-in EV tax credit is worth as much as $7,500 on qualifying vehicles; it ends whenever a manufacturer sells 250,000 units of a particular model. The tax credit is scheduled to end this year.

Among the most controversial measures facing Congress each year are tax measures such as the EV credit that are scheduled to expire.

That results in what is often a large “tax-extender” legislative provision that usually commands wide support. But provisions such as the EV credit can generate time-consuming end-of-year clashes between supporters and opponents.

The EV extender, “Drive America Forward Act,” would add a $7,000 credit for an additional 400,000 vehicles. General Motors and Tesla, whose EV sales exceeded the limit, are backers of the measure that was included among House Democrats’ Green New Deal proposals.

While more than 756,000 EVs were sold in the U.S. between 2011 and 2017, that figure represents less than 1 percent of the more than 111 million total of all vehicles bought during the period, according to EVAdoption, an advocacy group that favors increased EV sales.

Even so, EV sales have increased annually since 2008 and reached something of a milestone this year, as Ford Motor Co. announced that it’s introducing a sport-utility vehicle EV version of its classic Mustang.

More than 57,000 individual taxpayers claimed $375 million in tax credits via the provision in 2016, the most recent year for which data is available, according to the Congressional Research Service (CRS).

“EV tax credits are disproportionately claimed by higher-income taxpayers. Most of the tax credits (78%) are claimed by filers with adjusted gross income (AGI) of $100,000 or more, and those filers receive an even higher proportion (83%) of the amount of credits claimed,” CRS said.

The CRS also cited estimates from the congressional Joint Committee on Taxation that half of the claims for the credit will be filed by corporations.

“This could be businesses purchasing EVs. This also could be instances where sellers are claiming the credit for vehicles sold or leased to tax-exempt entities,” CRS said.

In a Dec. 10 letter to McConnell, signers representing the 33 members of the AEA-led coalition observed that when the EV credit was first proposed by Sen. Orrin Hatch (R-Utah), he promised it was a temporary measure.

“I want to emphasize that like the tax credits available under current law for hybrid electric vehicles, the tax incentives in the FREEDOM Act are temporary. They are needed in order to help get these products over the initial stage of production, when they are quite a bit more expensive than older technology vehicles, to the mass production stage, where economies of scale will drive costs down and the credits will no longer be necessary,” Hatch said in 2007.

Among the coalition’s member groups besides AEA are: Americans for Tax Reform, Americans for Limited Government, the Clear Energy Alliance, the CO2 Coalition, National Black Chamber of Commerce, Consumer Action for a Strong Economy, Competitive Enterprise Institute, Independence Institute, Citizens Against Government Waste, E&E Legal Institute, Mackinac Center for Public Policy, Taxpayers Protection Alliance, and the Energy45 Fund.

Contact Mark Tapscott at [email protected]