The federal electric-car tax credits survived the tax legislation overhaul of 2018, but President Trump himself has proposed the end to them. In his 2020 fiscal year budget proposal, the president said he would eliminate electric-car tax credits and suggested the move would save $2.5 billion in the next 10 years.
In total, the 2020 budget proposal is a $4.7 trillion document. The tax credit for EV buyers awards up to $7,500 to a buyer when he or she files their federal taxes the following year. The actual credit is based on battery size, with fully electric cars receiving the full amount, while some plug-in hybrids with smaller batteries receive less money in the credit.
Every automaker receives the same number of credits for 200,000 qualifying vehicles, but the battle for their survival has heated up in recent months. Both Tesla and General Motors triggered the phase-out period for the tax credits after selling 200,000 vehicles in the U.S. After reaching the cap, the credit halves itself to $3,750. The sum is available for buyers to claim for six months before it’s slashed in half again to $1,875 for another six months. After that, it disappears.
GM will be at a disadvantage as it looks to sell the Chevrolet Bolt EV and compete with new rivals still eligible for the $7,500 tax credit. The automaker has already teamed up with Tesla and Nissan to lobby Congress for an extension to the tax credit program. Other Republicans have also called for the program to end citing cost. On the other side of the aisle, some Democrats have introduced legislation to lift the cap entirely and provide unlimited credits.
GM also responded to the budget proposal and hit back at the idea of ending tax credits.
“We believe an important part of reaching a zero-emissions future and establishing the U.S. as the leader in electrification is to continue to provide a federal tax credit for consumers to help make electric vehicles more affordable for all customers,” the statement read. GM added that ending the tax credits now would be “premature” and “damaging” to its goals to make electric cars the new normal.