Free-Market Groups Urge Congress to Eliminate, Not Expand, Electric Vehicle Tax Credits

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In a joint letter released this week, thirty free-market groups urged House Ways and Means Chairman Kevin Brady (R-TX) to oppose “any effort to expand the current electric vehicle tax credit in any way.”

The federal government currently provides a tax credit of up to $7,500 for the purchase of a plug-in electric vehicle. The credit begins to phase out for a manufacturer’s EVs when 200,000 of those vehicles have been sold in U.S. markets.

Unsurprisingly, EV manufacturers and electric utilities who sell power to EV owners want Congress to extend the tax credit. Seventeen House Democrats have co-sponsored H.R. 6274, “The Electric Cars Act of 2018,” to expand the subsidy. Reason science correspondent Ronald Bailey reports:

Members of Congress worried that crossing the 200,000 vehicle threshold will harm EV “first mover” manufacturers introduced legislation in July that would eliminate the 200,000 car threshold. In addition, the proposed legislation would change the tax credit to a direct rebate available for the next ten years instead of requiring EV buyers to wait for their tax refunds. Some 36 electric utilities eager to sell more power to EV owners have also urged Congress to remove the manufacturer cap. 

In their joint letter, the free market groups counter that the EV tax credit is another “misguided” attempt to pick auto market winners and losers. Moreover, it transfers wealth from lower- and middle-income taxpayers to rich people. As such, the policy should be repealed, not expanded.

The groups offer several compelling reasons to keep the cap on EV tax subsidies and, indeed, “eliminate [the credit] entirely.”

  • The mere existence of the credit unavoidably propagates the false message that government, rather than consumers, should make the decisions about which vehicles succeed in the marketplace.
  • Limiting the tax credit to the first 200,000 cars puts an automatic cap on taxpayer liability. Rescinding the cap would pile up “billions more in future liabilities” at a time of soaring deficits.
  • As a recent American Energy Alliance poll shows, 67 percent of voters oppose subsidies for electric vehicles.
  • As a recent Manhattan Institute study explains, electric vehicles are not necessarily cleaner than modern internal combustion engines. New internal combustion engines combined with low-sulfur gasoline emit less pollution than EVs drawing power from coal power plants.
  • Electric vehicle subsidies overwhelmingly benefit the wealthy. A recent Pacific Research Institute study found that 79 percent of EV tax credits go to households earning more than $100,000 a year.
  • The Wind Production Tax Credit has taught us that when Congress extends “temporary” tax credits, those measures become a virtual entitlement “ballooning future costs without end.”

As for the complaint that the 200,000-car cap gives newer EV manufacturers an unfair advantage over “first mover” companies, the free market groups have a simple solution: “Eliminate the tax credit entirely, as the House proposed in last year’s tax bill.”

The following groups signed the letter to Chairman Brady:

American Energy Alliance | ALEC Action | American Commitment | American Conservative Union | American Consumer Institute | American Legislative Exchange Council | Americans for Limited Government | Americans for Prosperity | Americans for Tax Reform | Caesar Rodney Institute | Center for Freedom and Prosperity | Civitas Institute | Competitive Enterprise Institute | Consumers Action for a Strong Economy | Council for Citizens Against Government Waste | E&E Legal Institute | Freedom Foundation for Minnesota | FreedomWorks | Frontiers of Freedom | Georgia Public Policy Foundation | Heartland Institute | Heritage Action | Hispanic Leadership Fund | Independence Institute | Less Government | Mississippi Center for Public Policy | National Black Chamber of Commerce | National Tax-Limitation Committee | Rio Grande Foundation| Taxpayers Protection Alliance