Editorial: "Federal Electric Car Tax Credit, Once Bipartisan, Threatened by Republican Tax Reform"

[aventineavenue]

"Federal Electric Car Tax Credit, Once Bipartisan, Threatened by Republican Tax Reform"
kochvsclean.com/federal-electric-car-tax-credit-bipartisan-threatened-republican-tax-reform/
Published on Monday 06Nov17. Please share and comment on impact to Telsa and US EV market as a whole, and what actions can be taken to inform the public and Congress about the reasons the credit should be preserved.

Original article republished as it appeared on LinkedIn on 04Nov17:
Federal Electric Car Tax Credit, Once Bipartisan, Threatened by Republican Tax Reform

 

[tonybelding]

I don't think the credit should be preserved. It was designed to jump-start the market for electric cars, and to lure manufacturers to produce such vehicles, and it accomplished that. Job well done, it should ride off into the sunset now.

Ending it now also means that the companies who were first into EVs (such as Tesla) were rewarded, which seems reasonable. If it continues, then Tesla would actually find themselves punished, their credits having run out while laggard car makers still have plenty left. Getting rid of it puts everyone on a level playing field going forward.

 

[ChadS]

It is true that the current structure rewards laggards (I would like to see the credits pooled, rather than per manufacturer). There are many other issues with it as well; I posted a list of about a dozen problems here a year or so ago. And I am not fond of the general government propensity for this type of tax credit bonanza.

However, the EV tax credit was not something special to give EVs a leg up. The Bush Administration set it at $7,500 because that was calculated to be the NPV of the $12,000 in tax credits that petroleum companies get over the lifetime of the typical ICE. (That number was determined by the GAO in 2008; it included tax credits, but did not include any externalities or military expenditures). It was meant to level the playing field. It was not controversial at the time because it was "no cost", being offset by the tax credits not given to petroleum companies.

I am not positive why it was set as a personal tax credit, rather than as an industry credit as is the norm. Being a personal tax credit makes it a lot more visible and controversial. I suspect (though I am guessing) the lawmakers were trying to make sure the cars were actually sold in the US. The DOE at the time was specifically looking for ways to increase energy self-sufficiency without spending tax dollars; and EVs only help US energy self-sufficiency to the extent that they are sold here (both volume and location are important, and tax credits to consumers ensure both of those).

I would love to see the EV tax credit go away at the same time that the petroleum tax credits go away.

 

[ChadS]

As for EV market effects: I agree that the EV tax credit going away will help Tesla's share in the EV market.

However, I am positive that the EV market will be smaller. HERE is some work I did reviewing studies of incentive effectiveness. It is clear that incentives drive a LOT of buying behavior.