A new Senate bill would end the federal EV tax credit. Not signing on: states that actually manufacture cars.
May 7, 2024 at 12:00pm ET
It’s truly a shame that electric vehicles are getting caught up in our endless culture wars, because they don’t have to be. EVs represent a new type of technology, that’s all. But thanks to their outsize popularity in coastal blue states and federal tax incentives introduced to support their adoption, they’ve become extremely polarizing in America. Now, a new U.S. Senate bill seeks to end those tax credits entirely.
The bill has support from several GOP colleagues of the original sponsor, Republican Sen. John Barrasso of Wyoming. Not joining in support of Barasso’s bill: any states that actually manufacture electric cars. I wonder why that is?
The EV tax credit war
Tax credits have long been used to incentivize the purchase of hybrid and electric vehicles, both in the U.S. and abroad. But that often makes them a political target, even though in recent years they are helping to drive more local EV manufacturing as well.
Barasso’s bill, called the Eliminating Lavish Incentives to Electric (ELITE) Vehicles Act, would eviscerate every American incentive driving EV adoption over the past 18 months. It would repeal the $7,500 tax credit for new EVs, end federal incentives for DC fast chargers, end any tax credits for used EVs and close the “leasing loophole” that applies to that tax credit even if the car is not manufactured in North America. That loophole has driven significant EV leasing growth, including from brands like Hyundai and Kia.
“The electric vehicle tax credit benefits the wealthiest of Americans and costs hardworking American taxpayers billions of dollars,” Barrasso said in a statement. “Working families in Wyoming shouldn’t be footing the bill for the luxuries of Biden’s climate elitists. The federal government has no business pushing Americans into expensive electric cars they don’t want or can’t afford.”
Put aside, for a moment, the idea that these tax credits do make EVs more affordable and may make people want to buy them more—which has clearly been the case. Instead, let’s take a look at who is co-sponsoring Barasso’s bill:
Co-sponsors of this legislation include U.S. Senators Mike Braun (R-Ind.), Shelley Moore Capito (R-W.Va.), Tom Cotton (R-Ark.), Kevin Cramer (R-N.D.), Steve Daines, (R-Mont.), Joni Ernst (R-Iowa), John Hoeven (R-N.D.), James Lankford (R-Okla.), Mike Lee (R-Utah), Cynthia Lummis (R-Wyo.), Roger Marshall (R-Kan.), Pete Ricketts (R-Neb.), Jim Risch (R-Idaho), Mike Rounds (R-S.D.), Marco Rubio (R-Fla.), Eric Schmitt (R-Mo.), Rick Scott (R-Fla.), and John Thune (R-S.D.).
Besides all of them being members of Biden’s opposition party, you may notice that none of those states are hosts to any electric vehicle manufacturing. In fact, with the sole exception of Missouri, Kansas, and Indiana, none of the co-sponsor states even make cars at all.
Granted, some of those states are home to various supplier companies or even engine manufacturing plants. But no cars, period, are built in Wyoming. Or Arkansas. Or Montana. Or Florida. Or South Dakota. You get the idea.
Note that the bill’s co-sponsors don’t include any senators from Texas, where Tesla’s Austin Gigafactory lives; or Tennessee, home to Volkswagen’s ID.4 (and soon, Nissan EVs as well); or South Carolina, home to BMW in the U.S.; or Alabama, where Mercedes’ electric SUVs are built. And all of those are conservative, red states with Republican senators.
That’s the problem with Barrasso’s bill: it fails to take into account how the Inflation Reduction Act’s tax credits actually incentivize EV production in the U.S. and North America. After all, if automakers don’t build here, they won’t get the tax credit—which puts them at a competitive disadvantage against those that do. It’s no wonder that leaders from automaking states don’t want EV tax credits to end; the EV industry is adding hundreds of thousands of new American manufacturing jobs that depend on people actually buying the cars.
Moreover, Barrasso and several of his co-sponsor colleagues go heavy on the anti-China fearmongering, saying the tax credits are funneling money to a geopolitical adversary. But while it’s true that China maintains tight control over the battery supply chain for now, that’s changing rapidly as companies scale up North American battery manufacturing and sourcing operations—again, to feed demand for locally built EVs.
Barrasso’s bill is extremely unlikely to pass, let alone get to President Joe Biden’s desk. But looking into who sponsors it and who doesn’t gives you a good sense of just how serious it’s supposed to be.
Contact the author: patrick.george@insideevs.com
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