In the last two weeks, two different bills, both sponsored by Republicans, were introduced to the House of Representatives. One would extend the electric vehicle tax credit, the other would revoke it.
Plenty of people have pointed out problems with the EV tax credit with the main issue being that it subsidizes wealthy people purchasing luxury goods. The Pacific Research Institute published a study earlier this year showing 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. Additionally, that same report concluded that federal policies to promote the manufacturing and purchasing of EVs including tax credits for new buyers, financial support for the industry that produces them, and programs that promote efforts to educate consumers about electric vehicles will have a total budgetary cost of about $7.5 billion through 2019.
Last week, Senator John A. Barrasso of Wyoming introduced a bill to revoke the federal tax credit for electric vehicles (EVs), which offers a $7,500 tax credit to purchasers of the first 200,000 EVs sold per manufacturer. Today, in direct conflict with Senator Barrasso’s bill, Senator Dean Heller of Nevada quietly released a bill that would eliminate the cap on the first 200,000 vehicles sold and extend the tax credits to 2022. This raises a question: why is Sen. Heller introducing a bill in direct opposition to his colleague that would extend the federal EV tax credit? The answer: crony capitalism is alive and well in Nevada and Republican politicians are to blame.
In 2014, Nevada Governor Brian Sandoval approved a $1.3 billion subsidy package to Tesla,Inc. The biggest chunk of the deal gave Tesla sales tax exemptions for 20 years as well as payroll tax exemptions through 2024. In exchange, Tesla agreed to build a $5 billion lithium-ion battery factory outside of Reno. The deal also required at least half of all workers hired by Tesla to be Nevada residents.
After the deal was finalized, Republican politicians took an opportunity to celebrate their ability to hand out special favors to a privileged political firm. During the deal’s signing ceremony, Governor Sandoval proclaimed, “Nevada has announced to the world – not to the country, but to the world – that we are ready to lead.” Additionally, Assemblyman Ira Hansen, a Republican from Sparks, Nevada, said the deal was “arguably the biggest thing that has happened in Nevada since at least the Hoover Dam.”
Four years later, crony capitalism has run its course in Nevada as serious concerns about the direction of Tesla abound and a recent court filing has shown that Tesla was delinquent on more than $650,000 in Nevada state taxes. In that context, Senator Heller’s attempt to extend the federal EV tax credit and eliminate the 200,000-vehicle cap makes sense: it’s an attempt to keep the rent-seeking casino open so that politically-connected groups in Nevada can continue to benefit at the expense of the American people.
Last month, AEA spearheaded a coalition of free market think tanks that sent a letter to House Ways and Means Committee Chair Kevin Brady explaining the problems caused by efforts to expand the EV tax credit. Those problems are worth outlining again here as a critique of Sen. Heller’s new bill. The elimination of the 200,000-vehicle cap would be fiscally irresponsible as the liability to taxpayers would be limitless; despite generally positive feelings about electric vehicles as a whole, recent polling shows that 67 percent of voters believe they should not be forced to subsidize electric vehicle purchases; electric vehicles do not necessarily pollute less than modern internal combustion engines; and subsidies for electric vehicles overwhelmingly benefit the wealthy. It’s time to end the EV tax credit gravy train and force electric vehicles to compete on a level playing field.