10 Year Extension To US EV Tax Credit Proposed

Several Democratic Senators and Representatives have introduced legislation to extend the US federal tax credit for zero-emissions vehicles (ZEVs) by 10 years. The extension is wrapped in the Electric Cars Act of 2018.

Senators co-sponsoring the bill include Jeff Merkley (D-OR), Martin Heinrich (D-NM), Catherine Cortez Masto (D-NV), Kamala Harris (D-CA), Tina Smith (D-MN), Dianne Feinstein (D-CA), and Cory Booker (D-NJ).

The Representatives who introduced the bill in the House were Peter Welch (D-VT) and Jacky Rosen (D-NV).

As you may have noticed by now, there’s one problem — all of those members of Congress are Democrats. In other words, Republicans seem to not be interested in extending the tax credit. They have been more than happy to implement a blanket tax cut on the rich and super rich (the richest 1% of the population is getting 83% of the benefits of the tax cut) but not bother encouraging the purchase of clean electric vehicles via special tax credits for this young technology.

The co-sponsors of the Electric Cars Act of 2018 released a handful of statements on the proposal.

“It’s crazy that we might allow the electric vehicle tax credit to run out just as the American EV market is starting to gain a foothold,” said Merkley. “Every day, we see the effects of climate chaos all around us — record-setting droughts, out-of-control wildfires, destructive mega-storms, and spreading insects and ocean acidification. Market-based incentives that help EVs compete with gas-powered cars are not only good for our economy, they’re essential to our future.”

“At a time when electric cars are making advances in scale of production and becoming more competitive in the marketplace, we need to continue encouraging the progress we’ve seen — not take our foot off the pedal,” said Heinrich. “This bill is pro-growth tax policy that will keep us moving our transportation sector forward. We need to remember that making our cars cleaner, and modernizing our energy use overall, isn’t just about creating new jobs, or harnessing our innovative clean energy potential. It is about meeting our moral imperative to reduce carbon pollution and mitigate the devastating and costly consequences of climate change.” 

“I am proud to cosponsor legislation that will allow consumers to continue receiving important tax credits that encourage the use and development of electric vehicles in Nevada, and throughout the country,” said Cortez Masto. “There are projected to be over 7 million electric vehicles on our roads by 2025, and I will keep fighting in Congress to promote electric vehicles and other innovative technologies that reduce the impact of global warming and strengthen our economy.”

“Transportation is the single largest contributor to greenhouse emissions in the United States,” said Representative Welch. “It is urgent that we transition to cleaner, more efficient modes of transportation. Our legislation will make electric vehicles and their charging stations more affordable, while saving Vermonters money at the gas pump and reducing their environmental footprint.”

“I’m proud to see my Senate colleague Jeff Merkley introduce companion legislation to our bill with Congressman Welch to continue the electric vehicle tax credit for the next 10 years,” said Congresswoman Rosen. “This forward-thinking legislation will extend an important federal tax credit incentivizing Nevada consumers to transition to electric vehicles and provide more certainty as our state moves to a cleaner, more energy efficient economy. I’ll continue taking action in Congress to support policies that allow Nevada to reduce carbon emissions and become a clean energy leader.”

With requisite statements from the cosponsors out of the way, let’s get back to the Electric Cars Act. The biggest concern for many would probably be tax credit eligibility for Tesla buyers. Tesla was the first automaker to cross the 200,000 car milestone that triggered the tax credit phaseout. The new proposal eliminates the manufacturer limit and simply extends the tax credit period by 10 years.

Is a 10 year extension likely to make it through Congress? My hunch is, of course not. But I assume this is a smart starting point to get a shorter extension, perhaps 5 years. 

Another big improvement is that it allows buyers to spread the tax credit over 5 years. At the moment, you can’t spread it out at all, which means that you have to have $7,500 or more of tax liability in order to get the max tax credit. Many people don’t have that much tax liability, which means the credit clearly favors the rich over the middle class and poor. It’s a simple thing to spread out the period of time you can take advantage of the tax credit, so I would hope Congress would be sensible (if Republicans are sensible enough to pass this at all) to improve the availability of this tax credit to those who aren’t so rich.

Another huge improvement is that it makes the credit applicable at the point of sale. If you have to wait several months to get the tax credit, the credit is less helpful, particularly for people who need the credit to genuinely justify or enable the purchase. Again, making the credit eligible at the point of sales makes the policy more accessible to middle class Americans.

The bill also proposes a tax credit extension on EV charging infrastructure and sales of other alternative fuel vehicles. 

Here are a few more statements from Jeff Merkley on why the Electric Cars Act is so important and sensible:

“The transportation sector is now the largest source of greenhouse gas emissions in the United States, and a significant source of carbon pollution worldwide. Countries across the globe have recognized this challenge and are aggressively investing in electric vehicle technologies in order to bolster fuel security, reduce pollution, and improve health outcomes. Nearly a dozen countries and dozens of cities have committed to phasing out internal combustion engines. The U.S., however, is at risk of falling behind on technology development and deployment of electric vehicles. 

“The Electric Vehicle (EV) tax credit has been instrumental in helping American electric vehicle manufacturers such as Tesla and General Motors advance the EV market, and offers more options to consumers. Given global efforts to transition away from internal combustion engines, the U.S. should not be limiting the production and support of domestically manufactured electric vehicles. A recent survey found that 74% of consumers say the tax credit would affect their decision to buy an EV, and 63% said the credit is an important measure to support EV adoption.”