As we previously reported, now that the Biden Administration's bipartisan infrastructure bill has passed, House Democrats are working on a reconciliation package to get the rest of their plans included. As part of that package, there has been talk about a renewed US federal EV tax credit.
When talks first started about a future tax credit for EVs, it was already clear that Tesla may lose out on the credit for one reason or another. Some discussions referenced a price cap and others focused on rewarding union factories in the US.
According to a recent report by Automotive News, the House Ways and Means Committee pushed forth its latest proposal last week, and now, the credit for union factories is much larger, and there's almost no incentive to build EVs in the US, at least during the first five years of the proposed 10-year credit.
The proposal puts the maximum credit at $12,500 per EV, but $4,500 of that only goes to EVs assembled by union workers. Added to that, $500 goes to automakers who use batteries made in the US.
The credit would be fully refundable and it would come at the time of sale rather than making people wait to try to get it as a credit on their tax return. These details apply to the credit for the first five years. Over the second five-year term of the credit, only EVs made in the US would qualify, and the credit would total $7,500.
Finally, the House also wants to apply a cap so that only electric sedans under $55,000 qualify. The credit would be $64,000 for vans, $69,000 for SUVs, and $74,000 for pickup trucks. Individuals who make over $400,000 per year ($600,000 for head of household, and $800,00 for joint filers) won't be able to claim the credit.
There is a whole lot of promise in this proposal. EV buyers would get a larger credit at the point of sale. The fact that it doesn't apply to more expensive EVs arguably makes sense since the government should be focusing on simply getting people into an EV rather than helping them afford a $100,000 luxury car. Similarly, the salary keep can be justified since the government probably shouldn't be helping wealthy people buy a car. There are also arguments against such measures, but that's for a different article. You can share your thoughts in that in the comment section.
What's most interesting here is that it seems the House is targeting Tesla. Without Tesla, there wouldn't likely be so many automakers moving to electric cars. Tesla sells more EVs in the US than any other automaker, and they're made in the US. Meanwhile, some competing EVs from US-based brands are made overseas.
Tesla no longer qualifies for the current $7,500 EV tax credit since it was the first automaker to hit the cap. Since then, it has essentially been punished for its success. Now, the fact that Tesla isn't a unionized company could mean its EV tax credit is $4,500 less than its rivals' credits.
Tesla CEO Elon Musk says he tries to stay out of politics, and he's not necessarily a fan of tax credits or government subsidies. Thus far, he hadn't really chimed in about the various EV tax credit proposals, but this time, he did reply to a tweet.
What do you think? This topic deserves an in-depth conversation in our comment section below. Was this proposal drawn up with Tesla in mind? Does it seem as though it is intended to punish Tesla and favor legacy automakers? Leave us your comments below.