The Biden administration wants to provide $100 billion in new consumer rebates for those who purchase electric vehicles, and President Biden himself will be touting electric vehicles while visiting Detroit today.
Right now, almost all electric and plug-in hybrid cars purchased new in or after 2010 are eligible for a federal income tax credit of up to $7,500, depending upon the capacity of the battery used to power the vehicle. However, the tax credit was designed to spur the initial sales of electric models and stopped for a particular manufacturer after they sold 200,000 electric vehicles. General Motors and Tesla have reached that threshold, and GM CEO Mary Barra is pushing to have the tax credit restored for GM cars and made permanent. She contends the expiration of the tax credit amounts to punishing manufacturers who were most successful in developing the market for these vehicles.
As the comedic genius Remy observed back around Christmas 2018, the generous tax credit means those purchasing extremely expensive electric vehicles were effectively provided $7,500 in taxpayer money against the cost of their car, while lower-income Americans purchasing gasoline vehicles didn’t get anything. Americans may want to encourage the purchase of electric vehicles… but do they think a four-figure tax credit for purchasing a luxury vehicle is the right approach?
Right now, if you go down to your local Porsche dealer and purchase a Taycan Turbo S, with a manufacturer’s suggested retail price of $185,000, the U.S. taxpayer will cover $7,500 of your purchasing cost. Meanwhile, your neighbor who decides to buy a non-hybrid $20,655 Hyundai Elantra, which boasts a very environmentally-friendly 37 miles per gallon, will get no tax credit.
There are some cheaper electric vehicles on the market; currently the cheapest is the 2020 Mini Cooper SE Signature, with a manufacturer’s suggested retail price of $30,750. Motor Trend did not give it a rave review: “a tiny two-door with just 110 miles of range, plagued by a rough ride and an excess of road and wind noise. Its fast-charging ability isn’t that fast, taking 40 minutes to restore 80 percent of its range on a DC fast charge.” There are a handful of relatively cheap electric vehicles, but the price rises fast. The fourth-cheapest electric vehicle is the 2021 Chevrolet Bolt EV LT at $37,890. By and large, the people purchasing electric vehicles are those who are on the wealthier side of the car-buying market. There has been some discussion about limiting the tax credit to those making $250,000 per year or less.
The Biden administration and their Democratic allies remain committed to making sure the wealthy pay their fair share… and then giving them their money back, in the form of the $7,500 tax credit for electric vehicles and the restoration of full tax deduction of state and local tax payments.