A Tesla Model S in Nantucket, Mass., on June 24, 2018. The luxury Model S would not be eligible for a tax credit in legislation proposed by Sens. Joni Ernst and Mike Braun. (Noam Galai/Getty Images for Nantucket Film Festival)

Campaign to Limit Electric Vehicle Tax Credit Gathers Momentum in Senate

WASHINGTON—Republican Sens. Joni Ernst of Iowa and Mike Braun of Indiana are proposing to limit the federal tax credit for electric vehicles (EVs) to those costing $45,000 or less and end the subsidy entirely for affluent buyers.

Depending on the price of the EV purchased, the tax credit allows buyers to deduct between $2,500 and $7,500 from their federal taxes. The credit first went into effect in 2011.

“Iowa taxpayers shouldn’t be footing the bill for millionaires to get a discount on luxury cars. That’s why I’ve been working hard to get the EV tax credit off the books,” Ernst said in a March 4 statement announcing the proposal.

“With its history of systemic problems and fraud, this program needs to be scrutinized, which is why I’ve urged the IRS to take a closer look at its issues. I’m building on that effort by joining these two additional measures that will eliminate this incentive for wealthy coastal elites,” she said.

“As co-founder of the Senate Climate Solutions Caucus, I know we need to promote vehicles that reduce our carbon footprint, but it doesn’t need to be in the form of tax breaks for the wealthy and their luxury vehicles,” Braun said in the same statement.

“These two bills should be a slam-dunk for legislators who want to protect the environment while limiting tax breaks for the super wealthy.”

The Ernst/Braun proposal includes two separate measures. The “Ending the Electric Vehicle Entitlement for the Wealthy Act” would terminate the existing tax credit for joint returns representing joint annual incomes of $326,000 or more and for individual returns representing incomes of at least $163,300 a year.

The Affordable Electric Vehicle Credit Act of 2020 would only be available to buyers of EVs costing $45,000 or less. That ceiling would eliminate the credit for buyers of luxury EVs, such as the Tesla Model S sports sedan and Tesla Model X sport-utility vehicle.

The credit would still be available for the BMW i3, Chevrolet Bolt EV, Honda Clarity Electric, Hyundai Ioniq Electric, Hyundai Kona Electric, Kia Niro EV, Mini Cooper SE, Nissan Leaf Plus, Tesla Model 3, and the VW e-Golf.

Ernst and Braun cited data from the Department of Energy indicating that 42 percent of EV buyers who claimed the credit had annual incomes of more than $150,000.

Between 2011 and 2017, the department estimated the EV tax credit represented $2.2 billion in purchase incentives for customers. With EV acceptance in the market growing steadily, the value of the credit is expected to reach $7.5 billion between 2018 and 2022.

The Ernst/Braun proposals come as congressional Democrats renew their efforts to extend the EV tax credit, and the American Energy Alliance (AEA), which opposes it, begins a new social media advertising campaign with messages similar to the arguments made by the two senators.

An ad run on social media by American Energy Alliance. (American Energy Alliance)

“The AEA has repeatedly reminded lawmakers that 78.7 percent of the EV tax credits went to households with an adjusted gross income of $100,000 or higher, and more than half went to households with an adjusted gross income of more than $200,000,” the advocacy group said in a March 5 statement announcing the campaign.

“The AEA has also done extensive public polling on EV subsidies and identified a clear theme—a majority of Americans don’t believe taxpayers’ money should go towards paying for other peoples’ cars.

“Voters’ sentiments against paying for others’ electric vehicles especially sharpen when they learn nearly 50 percent of all subsidies are going to California.”

A spokesman for the Electric Vehicles Association of America didn’t respond to a request for comment.

The Senate is currently considering “The American Energy Innovation Act,” which extends the EV tax credit. It’s co-sponsored by Sens. Joe Manchin (D-W.Va.) and Lisa Murkowski (R-Alaska). Murkowski is chairman of the Senate Energy and Natural Resources Committee, while Manchin is the ranking Democrat on the panel.

Advocates of expanding the EV tax credit are expected to seek to amend the 550+ page draft bill to extend the credit’s duration and to expand the number of eligible vehicles manufacturers can build.

Sen. Ron Wyden (D-Ore.) introduced an amendment to the bill last week that would increase the manufacturers limit from the current 200,000 to 600,000. Tesla and General Motors would be the biggest beneficiaries of such an extension.

“The Senate should not advance an energy package without addressing languishing energy tax policies, many of which have bipartisan support,” Wyden said in a March 3 announcement.

“We’re facing a climate emergency. … My amendment would help reduce carbon emissions, lower electricity bills for American families, and advance us down the path toward a clean energy future,” he said.

But the AEA claimed more government spending and regulation in the energy field is the wrong approach.

“The measure confuses bureaucratic activity for innovation and ignores one of the most basic lessons of history: people innovate, government regulates. Innovation springs from reduced government interference and micromanaging, not from sprinkling billions of dollars at new research offices within various cabinet departments,” the AEA said.

An ad run on social media by American Energy Alliance. (American Energy Alliance)

Contact Mark Tapscott at Mark.Tapscott@epochtimes.nyc