Republican Senator John A. Barrasso of Wyoming has introduced a bill to revoke the federal tax credit for electric cars. Currently, every automaker is eligible for $7,500 tax credits, but the legislation would kill the credits entirely.
Not only does Senator Barrasso’s bill, currently titled the “Fairness For Every Driver Act,” aim to terminate the tax credit, but the legislation also aims to place a new tax on alternative fuel vehicles. Today, plug-in hybrid and electric car owners do not pay into the gas tax in the United States, which helps pay for infrastructure improvements. The bill aims to create a Federal Highway user fee for drivers of any alternative fuel vehicle.
Previous attempts to scrap the tax credit failed, but Republicans came close to terminating them as legislators debated the tax reform and cuts President Trump signed into law last year. Eventually, senators left the tax credit in the revised tax code, but a standalone bill could gain more traction in the U.S. Senate.
The federal tax credit gives buyers of plug-in hybrid and electric cars up to $7,500 back when the owner files their taxes the following year. It is not applied at the point of sale, and the final dollar amount depends on the size of the vehicle’s battery pack. Those who lease a qualifying vehicle are not entitled to the tax credit.
On the other side of the aisle, a Democratic congressman has introduced a bill to expand the tax credits and lift the 200,000-vehicle cap for automakers. Automakers, including General Motors, have spoken out for an increase in the tax credits. GM will likely lose its credits by the end of this year, or early in 2019. Tesla became the first automaker to reach the cap, and the credits will halve themselves until they run to $0 over the next few financial quarters.
Both bills are likely some time away from a full vote if they ever reach that stage. However, we’ll likely see lobbying ramp up as more automakers lose their tax credits. For GM, it puts the automaker in a tough situation as rivals begin to roll out electric cars with the full credits at their disposal.