Trump Wants EVs Tax Credit Gone. GM, Tesla Want It Expanded.

President Trump wants to end the federal tax credit of up to $7,500 on new electric vehicles and plug-in hybrids, to save (the White House says) $4.5 billion over the decade. This on a budget that calls for spending $4.7 trillion in fiscal 2020, or $14,000 per US resident. Nothing much may come of Trump’s proposal.

Most of the auto industry wants to see the tax credits continued. Tesla and General Motors not only want to see the tax credit remain, but they also want it expanded beyond 200,000 vehicles. By the most amazing of coincidences, Tesla and GM are also the only two companies that have run through their allocation of 200,000 $7,500 tax credits and are in the one-year wind-down phase that provides partial credits. There’s little question the credits have helped create the comparative handful of EV sales. Last year, EVs and plug-in hybrids were about 2 percent of the market, and traditional hybrids were another 2 percent.

The President’s budget submission is a proposal. Congress is the branch of government responsible for debating and passing a budget. It can take the President’s demands or requests as advisories. When both the House and Senate were in Republican hands 2018-2019, they routinely ignored his requests. Now the House is in Democratic hands.

Trump also proposed ending the Advanced Technology Vehicles Manufacturing loan program as well as some other Department of Energy programs he said were “costly, wasteful, or duplicative.” Whether they are or not, they’re scattered across multiple states, meaning the legislators there are fond of the programs: in Illinois, Kentucky, Michigan, Missouri, New York and Ohio for Ford; in Tennessee for Nissan to build advanced batteries and assemble the Leaf EV; and in California for Tesla to develop its Fremont manufacturing plant. In his budget proposal, Trump said, “The private sector is better positioned to provide financing for the deployment of commercially viable projects.”

The tax credit works this way:

• Hybrids such as the Toyota Prius had their shot at tax credits. That’s long gone, as are the stickers that allowed access to HOV lanes with just the driver aboard. These cars all had (have) batteries too small to qualify under the EV/PHEV program.
• Current law provides a tax credit of up to $7,500 on the purchase of a battery electric vehicle or a plug-in hybrid. The vehicle has to have a rechargeable battery of at least 4-kilowatt hours (kWh), in which case the credit is $2,500 plus $417 per additional kilowatt hour. Hybrid batteries are about 1 kWh. So it breaks down as follows:

4 kWh, $2,500 potential tax credit5 kWh, $2,917 ($2,500 plus $417)6 kWh, $3,3347 kWh, $3,7518 kWh, $4,1689 kWh, $4,58510 kWh, $5,00211 kWh, $5,41912 kWh, $5,83613 kWh, $6,25314 kWh, $6,67015 kWh, $7,08716 kWh, $7,500

To get the tax credit, the buyer had to pay taxes and earned enough to owe $7,500 in federal taxes the year the car was bought (taxes owed for the entire year, not for the balance due come April 15). If you owed $4,500, your credit against taxes was … $4,500. If you didn’t pay taxes, you could lease the car, the title-holder got the credit, and the $7,500 was (should be) passed along as a lower lease rate.

Critics of the tax credits say they want to see companies stand on their own feet. Some of them just don’t like EVs and don’t see EV subsidies today as a hedged bet against climate change issues now and in the future. Some made a more solid point, that Tesla-buyers in the gilded areas of Silicon Valley in California, or the metro-New York area, probably didn’t need a $7,500 tax credit tip in favor of buying an EV.

In the US, odds are that if you’re a big business, you’ve gotten tax credits to move to a different state, to stay in your current state, to add jobs, or to install pollution-control equipment without which you get in trouble with the government. Some New Yorkers helped drive Amazon out of New York City, saying the arrival of 25,000 high-paying jobs is bad for the city (those people would drive up real estate and other living costs). Interestingly, the credits offered for the Hudson Yards business and residential complex just west of Pennsylvania Station were twice what Amazon would have gotten, $6 billion versus $3 billion.

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