Political Editors / September 4, 2019

Automakers Demand More Electric Vehicle Tax Breaks

Washington really wants to keep picking winners and losers in the auto industry.

In Washington’s upside-down parlance, a temporary subsidy actually means something closer to permanent. A recent example demonstrating this reality is the electric-vehicle (EV) tax credit. Back in 2009, part of Barack Obama’s so-called “stimulus” package included an EV tax break intended to help the auto industry counter the high cost of developing electric cars. As The Wall Street Journal explains, “The federal government currently provides a $7,500 consumer tax break for an auto maker’s first 200,000 cars. The tax credit then drops by half for EVs sold over the next six months, and by half again for another six months. It then disappears.”

However, as Tesla and General Motors both surpassed 200,000 EV’s sold last year, and Ford, Nissan, and Toyota are quickly closing in on that sales threshold, automakers are lobbying Congress for the tax break to be extended up to 400,000 sales. And thus far their lobbying has proven somewhat successful. Senators Debbie Stabenow (D-MI) and Lamar Alexander (R-TN) are currently floating an extension for the EV tax break. If passed it would cost taxpayers an estimated $16 billion over the next 10 years.

As the Journal notes, “It’s hard to imagine a more blatant income transfer for the well-to-do. Electric cars are significantly more expensive than the average vehicle, with a starting price of around $36,000. A recent Congressional Research Service study found that nearly 80% of the credits were claimed by households with adjusted gross income of more than $100,000. Sales data show that about half of all electric vehicle sales occur in one state — California.” We’re shocked — shocked.

Washington’s habit of picking winners and losers rather than letting the free market decide only ends up costing everyone. It’s time to end these subsidies, not extend them.

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