Republican Tax Plan Kills Electric Vehicle Credit (arstechnica.com)

An anonymous reader quotes a report from Ars Technica: The nascent market for electric cars will suffer a big setback if the Republican tax plan released on Thursday enters into law. Among the changes to the current tax code would be an end to the Plug-In Electric Drive Vehicle Credit. That's the tax incentive that currently means up to $7,500 back from the IRS when you purchase a new battery or plug-in hybrid electric vehicle. Since the start of 2010, the EV tax credit has been $2,500 for a plug-in vehicle with at least 5kWh battery capacity. Every extra kWh nets another $417 up to a maximum of $7,500, although you would need at least that amount in income tax liability -- the IRS won't cut you a check to make up the full amount. It was never meant to be permanent; once an automaker sells 200,000 qualifying vehicles (starting from January 1, 2010) its eligibility is phased out over a matter of months. But in the almost seven years since, no one has reached that limit yet. Tesla will almost certainly be first, with General Motors not far behind; between them, they've sold a lot of Model Ses and Chevrolet Volts. If this tax plan is enacted, it will surely mean pain for both companies, as well as anyone else hoping to sell a lot of EVs here in the U.S. The data is pretty clear -- tax incentives sell electric cars, and the market for EVs can dry up very fast when they're abolished, as Georgia's recent experience shows.

Comments

What about agriculture subsidies?

[El Cubano]

Among the changes to the current tax code would be an end to the Plug-In Electric Drive Vehicle Credit.

I can't say that I disagree. However, I would really like to see an end to agrictulture subsidies. While electric vehicle tax credits will probably have a net long-term impact on the environment, agriculture subsidies just smack of make-work.

Re:What about agriculture subsidies?

[PolygamousRanchKid]

Among the changes to the current tax code would be an end to the Plug-In Electric Drive Vehicle Credit.

I can't say that I disagree.

Folks who can afford electric vehicles tend to be much more affluent than the normal folks who need to bust the piggy bank for the small change to barely scrape it over the price finish line. So, in this case, the plan would actually stick it to the rich.

However, I would really like to see an end to agrictulture subsidies.

Folks involved in "industrial agriculture production" tend to be even more affluent, and have a bigger budget for hiring lobbyists. They own your Congress Critter. So agriculture subsidies will remain the dug up, stitched up drunk and disorderly Frankenstein Monster that they are.

The lobbyists can cry rivers of guaranteeing food supply stories and price stability stories, but when push comes to shove, the subsidies benefit rich producers. So the rich win this one.

Re: What about agriculture subsidies?

[Anonymous Coward]

You can't collect the subsidy unless you follow the rules, e.g. soil conservation, nutrient governance, etc.

Sadly, the Freedom to Farm Act from 1996 ended that fair bargain. It dropped the rules immediately, then phased out the subsidy over time. This turned out to be a big scam, because the Farm Security and Rural Investment Act of 2002 kept subsidies going, but kept the rules out. This mess is hardly ever talked about, because rural America votes anti-government, but is a solid block for keeping its pork.

Re: What about agriculture subsidies?

[darthsilun]

The solution? Free trade. Poor countries should buy capital intensive crops like grain and legumes from America, and focus on labor intensive crops like tomatoes, strawberries, coffee, and mangoes.

Do you mean like my Argentine raspberries and strawberries? And my Mexican avocados and coffee? And my Chilean grapes? And my Guatamalan bananas? IOW I'm pretty sure we're already doing this.

That makes everyone better off.

Does it?

I'm not aware that much of central and south America have geography like the American and Canadian prairies – which we destroyed – that could be converted to growing grains and legumes in the industrial quantities that we do. I'm not totally convinced that America growing grain is what has relegated central American farmers to poverty. The banana plantations though, are a different story.

And oh, by the way, a lot of that corn (maize) that we grow is feed stock for cattle. Why? Cattle naturally eat grass, which is what the prairie was before we destroyed it. I'll tell you why? It's because they can fatten cattle for market on corn in half the time it takes on grass. Despite knowing that, n Argentina and Brazil they let their cattle graze on grass. The cattle farmers know it's better for their cattle. And almost anyone who has tried grass fed beef can tell you, it does taste better. It is better for the cattle; their digestive system evolved on grass, not corn. So it's better for the cow. It's better for you. But it's not better for the farmer's bottom line. Guess who decides. Hint, it's not you.

Well, except when they can sell their grass fed beef at a substantial premium. Which I've noticed they quite happily do.

Re:The subsidy is a wealth transfer to the well-of

[Pulzar]

There are no middle or low-income families that drive these vehicles, only upper-class. And especially with the Teslas, these vehicles are not only a form of transportation, but also status symbols.

I can agree on that when it comes to Tesla's S/X models... but what about the Leaf, Volt, Bolt, and other "cheap" electric vehicles? Those are far from status symbols, and the people that drive them are definitely not upper-class.

Maybe it would make sense to continue to offer subsidies on cars priced below, say $40K, and then scale it down or outright remove it for higher priced vehicles.

Re:The subsidy is a wealth transfer to the well-of

[El Cubano]

the effect of the current subsidy system is to transfer tax dollars to the already well-off.

Of all the things wrong with a subsidy, this is the least problematic for the electric vehicle subsidy. By your logic, the people receiving the subsidy are those who actually pay federal income taxes. Remember, the bottom 50% of wage earners have effectively no federal income tax burden. So, this isn't a wealth transfer to the wealthy. At worst, it is a discount on the taxes that they are actually paying.

The real problem I see with subsidies like this is that they tend to artificially raise the price of the product being subsidized. This happens with college tuition, agricultural produce, and even happened with low end fuel-efficient cars during the cash for clunkers program.

The real problem for subsidies is that they create a market distortion. There are certain limited occassions where that sort of thing makes sense and electric cars, even those which only the "well off" can afford might be one of the few good occassions, owing to the potential long term environmental benefit. I would rather the market function well without government interference, but there is still a way to go until electric vehicles become truly cost competitive.