Op-Ed: $7,500 Federal Electric Car Tax Credit Definitely Needs Reform

MAR 13 2015 BY ERIC LOVEDAY 121

That Tiny * Noting The $7,500 Credit Does Not Apply To Me

That Tiny * Noting The $7,500 Credit Does Not Apply To Me

A well-researched, informative article on the federal tax credit for electric cars popped up over on HybridCars.com a few days ago.

It’s definitely an article that should be filed under must-read.

Titled “Does The $7,500 Plug-In Car Tax Credit Need Reform?” the article examines the credit on several fronts, including one that strikes a personal chord with this author.

I won’t rehash the article here, but I will state why it prompted me to write this brief post.

You see, I want to buy a new Chevrolet Volt this fall, I don’t want to lease one.

However, I qualify for exactly $0 of the tax credit (journalists aren’t typically rolling in the dough, you know).

Quoting HybridCars:

“Early adopters of the 2011 Chevrolet Volt – as just one example – had average household incomes of $175,000 and other plug-in buyers have been from the six-figure league.”

Umm… that’s not me.

My Tax Accountant Has Informed Me That I'd Get $0

In Regard To #1, My Tax Accountant Has Informed Me That I’d Get $0

So, here I sit wanting a 2016 Chevy Volt, yet I’d get not one penny from the federal government if I purchased one.  Therein lies the problem.  Without the credit, the next-gen Volt is beyond my means.  With the credit, I’d find a way to buy one.

Some may say I’m just whining because I don’t (wouldn’t) get money back.  Actually, I could care less if I got the money back from the Feds.  What I want is a new Volt I can afford.  Preferably one that I can finance for long enough to make the payments fit my budget.  I could make it work if that extra $7,500 found a way into the transaction/financing somehow, but without it, I’m stuck wanting a car that’s out of my price range.

Are there other potential buyers (Volt, LEAF, or any other plug-in) in a similar situation?  Or am I making a fuss over something that’s not nearly as problematic as I’ve described above?

Feel free to let the comments flow on this one!

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121 Comments on "Op-Ed: $7,500 Federal Electric Car Tax Credit Definitely Needs Reform"

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Why not just lease it, then at the end of the lease buy it? You get the federal money and an initial low payment.

+1

Doing that with my leaf lease.

The cost to buy my Volt after the lease ends is going to be around $5,000 more than the car is worth. Maybe Criswell will work a deal with me, but I am not holding my breath.

That does typically seem to be the case and leases cost more overall (if you buy at lease end) than buying, unless there’s some super special lease deal.

Dear EL, I was in almost the same situation as you – will only get some $500 in tax credit, at most, due to family deduction; hence, forced into leasing. One “trick” (high level here) that’s not being advertised is the 1 time payment lease, i.e. negotiate just like a purchase, then have the first 2/3/4 years work out as a lease, then, tell the finance manager that, instead of making that X number of months payments, you pay everything on the 1st payment, to see how much that will be. By doing so, you don’t have to pay any interest on the lease (typically, some 10-18%. Yup, 10-18%). On the 1st payment, you call the financial company, and tell them that you will just buy out the entire vehicle… There – you get the $7.5K tax credit, with caveats. 3 problems with this method. If you total your vehicle before the buyout is finalized…you don’t get a thing (the car still belongs to the financial company, not you, so you don’t get anything from insurance, and you’ll have to ask for your money back from the financial company if you have submitted your payment at that point). You may… Read more »

it’s really the lease company you have to negotiate place, not Criswell. I tried my best with Ally, but they wouldn’t budge. In the end, I returned my leased 2013 to Criswell at the end of the lease period, and bought a new 2015 with 4 miles on it for $6000 less (after tax credit) than the residual on the leased 2013. Even if I hadn’t qualified for the tax credit, that’s only $1500 more for a car two model years newer and with no miles on it. You’d probably be better off just turning the car in and buying a new one.

The dealership doesn’t have much incentive to work with you. They want you to buy a new Leaf so they can make a sale. What happens to your old car means nothing to them, because it will likely go to auction anyways.

You can always spread the tax credit aout about three or four years if you don’t make enough. You don’t have to use it for just one year. See your tax person.

Negative. The credit does not carry forward.

I didn’t say forward. You can spread it back.Its called income averaging.

Income Averaging was ended for everybody except farmers and fishermen by Reagan as part of the tax reform that slashed tax loopholes.

Unless there are a lot of professional commercial fishermen and farm owners here, your “tax advice” is just going to waste a lot of people’s time and money.

There are no means of evading the tax requirements for the federal incentive. You have to actually have the tax liability in the actual year you purchase the car.

That’s the current problem with the tax. You only get to use it in the year you buy an EV. So if you make enough to owe the full $7500, you get to benefit from it entirely.

Someone else who after deductions and everything only owes say, $4500, only gets $4500 back from that credit.

As a result, it becomes regressive in that the lower and middle class people don’t benefit from it as much as the wealthy. And truthfully that’s the people who would benefit from the tax credit the most, whereas for the well off, an EV is probably their 3rd or 4th vehicle.

I pay more than $7500 a year in taxes and let me tell you I would not consider myself wealthy

It should be a rebate like the cash for clunkers program. The tax credit subsidizes only high income EV buyers, not the class of people who most need the subsidy.

Exactly!

Cash for Clunker dollars went to people who made above the median income too. That was one of the talking points against it.

The reality is that the Median New Car Buyer makes $70K/yr now. Any program that pays an incentive to New Car Buyers will ALWAYS go more towards higher income people, because that is who buys new cars.

Even if you change the program to being a cash credit at purchase time, the number of people who buy brand new will still trend towards that $70K number. Because for every buyer that doesn’t qualify for the current credit, there will be 10 other buyers that would anyways, no matter how the incentive gets paid out.

I agree that making it a credit at time of purchase would be a great improvement for everybody. But don’t be fooled into thinking it will magically change who it is that predominantly buys new cars.

A point-of-sale rebate would be better.

As for the current system, transferring monies from a traditional IRA to a Roth is a method of generating income to get the credit.

Great suggestion Mark. I’d never heard that one before.

You have to pay tax on it sooner or later. You should move a little each year George, just enough not to change your tax bracket.

Even Eric could put some away in a traditional IRA this year, then put some more in a ROTH in 2016 and move the traditional to the ROTH generating more income. Buying the Volt in 2016 of course. That may not be enough to get all of the credit, but it would get some. And when he retires the tax has already been paid.

I favor Howland’s 1% sales tax, but for now, you have to play the cards they deal ya.

That is a pretty slick idea. +1

CherylG's_DirtyLittleSecret

If you don’t have the 55k income then most likely you don’t have a ROTH.

It’s a little bit of a misconception, but Roth accounts are better for lower to middle income tax payers. Roth eligibility cuts out at $114k-119k for a single taxpayer. Over that you can’t use it.

Outstanding idea.

Along the same lines, if you happen to own any stock (another asset, house, etc.) that has gone up in value, selling it and buying it back would give you a big one time tax liability that could be offset with the EV credit.

For those of you who work for a company and have a 401(k) plan this is called an “in-service rollover.” The rules will vary from plan to plan so read your specific plan rules. In my situation an in-service rollover can only be initiated from after tax savings (Post 1986 AT) funds. However, if you also have saved tax-deferred (pre-tax) money there is a ratio you are forced to roll both pre and post tax money over together. It’s a lot of math but really not all that complicated. So if you need a $7500 tax burden to take advantage of these credits, this approach is a viable option.

A quick example might be rolling over $10k pre and $10k post tax money into a Roth IRA. The $10k pre-tax money would trigger income tax. If you are in a 25% marginal income tax bracket that would add $2500 to your tax liability for the year.

So if I inderstand correctly, the tax credit only helps you if you pay at least $7500 in federal income taxes each year? What would your income have to be to pay that much tax?

It depends on your deductions (kids, mortgage interest, etc.) but $55,000 is a decent ballpark figure.

Should people earning less than $55K be buying cars that cost more than $35K? When I was earning $55K, I was leasing a car (so that I can have a new car). After that, I bought a $20K car.

But yes, I digress. The tax credit should be reformed. Maybe give it directly to auto manufacturers/dealers to lower PURCHASE price of vehicle so that ANYONE can take advantage of it.

Acevolt’s suggestion is spot on. Just lease it. Easy pie. Gives you the flexibility to buy later. Big plus is you get the tax credit (indirectly) on the spot. No waiting for next year’s tax return. You also pay less in sales tax.

“Should people earning less than $55K be buying cars that cost more than $35K”
——
Yes, when the credits are designed to help the adoption of a technology which is better for everyone.

Exactly!

That’s the idea behind the incentive.

I’m not sure if that’s “exactly the idea behind the initiative”.

The tax credit is to spur adoption of new technology by reducing the price premium.

Still, level-headed folks tend to live within their means. But I guess that’s not our government of today wants. They want you to buy houses you cannot afford, education you cannot afford and now, we have folks who think they ought to be able to buy cars they cannot afford.

There’s another side to this. It is possible for one to dodge taxes and thus complain they can’t take advantage of the tax credit.

If you make less than 55K a year I think that the bus is a good option. I am not being mean here, I am serios.

Only works if you have a bus route that works for your commute. Many don’t.

“Actually, I could care less if I got the money back from the Feds. What I want is a new Volt I can afford. ”

This is why I alway saw this money not like a rebate for the consumers, but a bonus for the car builders.

I agree.

I wouldn’t call it a “bonus” as the car makers are breaking even or just making a little money per each car.

(not counting the $100K+ cars)

I wan’t a Tesla Model S P85D but can’t afford it.
Maybe I’m too old to accept that not buying things I can’t afford or will hurt my financial future is part of life…

I see your point but I think the complaint is that he CAN afford the after-incentive price, just not the before-incentive price. What public good is achieved by letting people with higher income buy the car at a lower price than someone with lower income?

I make north of 100K ad I still ran all the numbers and based my leasing decision on how much I could save.

I think that this post illustrates a flaw with the tax credit, it does not help the people who need it. Why would a wealthy Tesla buyer qualify and a middle class Volt buyer not?

Here in Ontario we have a fair system, there is a rebate of up to 8500 C$. Leases longer than 36 months also apply. The rebate is independent on one’s income. Just the car’s battery size matters.

There is no “qualify”, its based against the tax you owe. If you make $200K and have a $1000 tax bill, then that’s all you can take. If you make $70K and owe $7K in taxes then that is how much of a credit you can take.

Buy a used one. I think you can pick one up for around 15K or so.

Definitely thinking about doing that.

Contact this guy: Thomas Thias: He is a big Volt advocate and a Chevrolet salesman in the D.C. area.

Thomas is so passionate about the Volt, he almost lost his job at the dealer for selling it so much and not pushing Tahoes. He’s a great guy to talk to about strategizing to get a used or new Volt.

https://twitter.com/AmazingChevVolt

Yes, I know Thomas. He’s one of the strongest Volt supporters on the planet!

If you really want the 2016 you will only have to wait a few months after launch before they start showing up on the used car lots.

You can find 2011 leaves breaking the $10,000 range. Those cars still have a lot of battery life left.

+1 Having gone from never buying a new car until >40 y/o, to buying two new EVs I think used is a prudent option.

Volt 2 will have higher volumes, than when Volt 1 started. The first time around it took a long time before the used market reflected Price, minus the tax-credit. I don’t think that will repeat, but I sympathize with having the extra wait.

Best case: If you can rotate out of a traditional IRA.

I always had a beef with Volt’s “175,000” average income claims. Try doing the math of how many ~$62,000 median income households had to buy Volts, to balance out a $20 million Jay Leno…

Yep. Median income would be a far more useful number. Or at least include the variance.

The other problem (I didn’t see it mentioned here) is that the tax credit unfairly helps those companies that are late to the market with their EV offerings. Nissan and GM have invested heavily in their vehicles. They’ve even lost money on a lot of them. Eventually, the tax credits for these companies will come to an end. Companies like Chrysler have sat on their hands and done nothing. Battery technology and cost savings continue to progress thanks to companies like Nissan. But what happens after Nissan runs out of credits? Chrysler can come in and take advantage of the work Nissan did and have an unfair advantage in selling their vehicles to the masses.

It also helps companies that have the b*lz to subtract out the tax-credit, in their scripted trade-in offers.

A common complaint about the $7500 has been its substantially given (or more correctly, the $7500 is not taken from) to rich people.

I feel for the journalist, although if it makes him feel any better people who make slightly more than him pay substantially more in other taxes…

Of course the $Billionaires on wall street pay ZERO sales tax. That’s why people should be in favor of a 1 % wall street sales tax with a $1 million exemption. It wouldn’t even affect 99.9% of most people, and wouldn’t hurt the .1% much. I pay 8.75% sales tax on most everything. Why can’t they pay 1%?

Why do you say billionaires don’t pay sales tax?

Its common knowledge here that the top %1 pay no taxes, get large government subsidies, and eat human flesh from poor people.

There is no sales tax on financial transactions. If there were, the middle class would need a lifetime $1 million exemption so that their relatively small potato transactions are exempt.

people who don’t pay more than 7.5k in taxes shouldn’t buy a car worth 35k? the purpose of 7.5k rebate is to reduce the price of car (battries specifically) so that the car wouldn’t cost 35k and people can effort it. so it makes total sense to give the credit to the car company (or the dealer) directly.

Eric, I feel your pain. While I’m not in the six figure league I was fortunate enough to just barely take full advantage of the tax credit for my Focus Electric. Granted it required me to delay the purchase and reorganize my entire financial life to make it possible. I had to minimize my 401k contributions, reorganize donations I make to charities and spend months running calculation after calculation to make sure it was possible. Before I knew it was possible I was tempted to buy a used one because the resale value is usually reflective of all the discounts.

All they had to do was make it like the New Homebuyer Tax Credit a few years ago, fully refundable meaning you got a check if you didn’t have enough tax liability. Stupid Congress

My wife and I just went through this last month. We were looking at getting an i3. Got so excited when it seemed all numbers were working until my wife informed me that because we don’t make that much we would only be able to claim about $50 of that $7500 credit. That meant there was no way I could get the car. Sigh. Can’t tell you how sick it makes me to know that the only ones getting the credit are those who don’t even need it. I’m all for the credit but the way it is set up is essentially taking from the poor and giving to the rich since the poor cannot avail themselves of this provision but they are having to fund it via their taxes. Albeit indirectly. So I will just have to wait until more cars come on the used car market with its attendant depreciation.

If you lease it the tax credit will be subtracted from the purchase price of the car, but you must have good credit to qualify for a lease.

Yes and no. BMW only credits you about half that money. They keep the rest. That is not enough to make leasing the better alternative long term. I ran the numbers on the i3 and a purchase was definitely the better option financially.

Eric, what about asking someone you know, that has the cash, to buy the car at the end of the year, then sell it to you in January?

(hey, doesn’t InsideEVs need a company car? 🙂 )

It has one, but the evil, overpaid editor-in-chief is hoovering up all that tax goodness, (=

It would need to be a close relative so they could gift the car to you so you would avoid paying sales tax twice.

Or from a friend in a state that doesn’t have sales tax, Alaska, Montana, New Hampshire, Delaware, or Oregon. Eric would have to pay the sales tax when he brought it back to Michigan. (use tax)

Bonus if those other states have extra incentives.

Add New Jersey to that list, since they don’t have sales tax on EVs. Maybe Tom could use a tax credit…

Technically, that could be ruled a “straw purchase” if it was done intentionally and with forethought. This would be ruled tax fraud if caught, especially if Eric actually drove the vehicle as if it were his own for that year.

1 important Econ/Finance 101 subject: how much can you afford on buying a car? Back in the 90’s/early 2000’s, the answer was: around 25%, at most 30%. Thus, see a few people above, suggesting that the $7.5K credit justifies the purchase is, imho, not a sound advice. There’s a difference between what you can buy, and what you can afford. To buy a $35-40K vehicle (on the road), you need at least $110-120K income. Obviously, a whole lot more if you have kids. To qualify for the full $7.5K tax credit – it will be the easiest if you are single and don’t own any property. Then you will most likely be in the AMT category. Salary is then around $60K annum. But if you make that amount, you really should be looking at a $18K vehicle at most. If you have kids and a house, and even some other tax deductible investments, such as 529K, 401K, etc. (which you should be contributing 1st before buying a vehicle, as the latter is a money losing item from the get-go, unlike the former) – you need to be around $180-200K annum! Hopefully, people can see why the current tax credit is… Read more »
I see the logic in this myself. However, there is some extraordinary assumptions that are at play here in regards to an ev purchase…and one done by someone in an income bracket on the low end that is already driving a vehicle. If Volt 2.0 base is lets say $32,000, that works out to about $410 on a 7 year purchase (assuming a low promotional rate as well of 2-3%). Now if you deduct the $7,500, the financing works out to $310ish – $100 cheaper. This is likely still a bit steep. However, if Eric is displacing a late BMW 3 series with a few years on it (which I’m pretty sure is one of his cars), he is tossing away 22 MPGs. Using just epa listed data, his fuel costs move from $2,050/year to $800, a savings of another $100 a month, so his effective cost is $210 a month – which is reasonable. Then there is also the fact he is now driving a new 2016 car with full warranty. I’m not sure what the assumption for repair/maintenance costs are for the averge 7-10 year old car is, but it has to be close to another $1,200/year or… Read more »
@JC, The implication here is what vehicle you can afford to buy (at a split second of time) based on a certain level of income. Maintenance cost over an extended period of time (or true ownership cost) will definitely complicate things a whole lot more. I understand your scenario, but when will it stop – on rationalizing “yes, I can buy/afford it?” You then include insurance, which usually is much much cheaper on the old vehicle (you may only need to buy 3rd party in this case) vs a brand new technological one. You then include, “what if I’ve other life changing events and can no longer afford that monthly payment?” Well, with the old car that you’ve already paid for, you can sell it and buy a even cheaper (or more fuel savings) used vehicles. With the new one which you are still paying a monthly fee, that’s going to be a big problem. I am not saying that people should not buy EV at all. I am “stating” that people should NOT buy a vehicle of a certain price (EV or not) when they really can’t AFFORD it. Most importantly, I am definitely saying that current $7.5K tax… Read more »
Yes, I do understand your point…people do like to split hairs on the true cost of ownership on an EV. I was trying to stay inside Eric’s framework, but I will say as there are now EVs available much cheaper, as low as $22,995 – which can go much lower still with some negotiating (mitsu i-MiEV, smart ED, etc). If a moderate to low income earner can afford any to buy any car at all, the i-MiEV with the credit applied IS the lowest cost new car product on the market today (TCO) – EV, ice or otherwise. Without the credit it is far from it. You net about $190ish dollar payments (using example above – 7 years, 2-4% int), and a fuel cost to operate of about ~$50 on average. Insurance is also fairly inexpensive. In those low-cost EV scenarios, the credit would be a fairly large asset (net positive) to people’s pocket books. Given this segment has reverse trends to the norm in the fact that MSRP pricing is constantly falling (and ranges growing), I think “credit applied” math is getting more and more attractive to the moderate wage earners who want to own an EV and could… Read more »

There’s something else wrong with Londo’s statement “To buy a $35-40K vehicle (on the road), you need at least $110-120K income.”

What if you have $35K in cash saved? I bought my Volt with cash, but I still continue to make payments to myself for my next car. When I have enough saved up, I will buy that with cash. Like my Dad always said, “It’s not how much you make, it’s how you spend it”.

This is a very salient point too. Actual income level sometimes isn’t congruent to lifestyle or to what one can afford.

As an example, I worked full-time a year after high school/before college and lived at home when I was 18. I maybe made $15,000…but there was near zero tax paid on that low amount and I had zero expenses – my disposable cash was likely equal to many of those today making $100,000.

18 year old me living today (provided I didn’t leave home)could afford to buy a 2016 Volt…but I would not be able to access the $7,500 incentive.

Same goes for location. If you live in some more economically “thrifty” areas of the US your money will go multiple times further than if you live in a nice neighborhood in San Diego.

In the end, anyone living below their means and being frugal over an extended period of time (~10% of income saved – no matter the amount) usually comes out far ahead the your average upper middle class wage earner in the end.

…so “*” on all assumptions, lol

Two points in the original article that I was unaware of:
1) there is less administrative overhead to the tax approach than a rebate
2) the tax method avoids requiring a pool of money which might be a tempting target for lawmakers
3) Volt leases are less likely to credit the entire $7500

If the rebate is administratively expensive, perhaps making the credit refundable would have the same effect?

I can’t tell you how you should save up to buy a new car, but I’ll tell you what I did to afford my $41K 2011 Volt. When I first heard of the Volt concept in 2007 I open up an additional bank account and auto deposited $100 into it every week. By the time the Volt was available to order I had accumulated around $21K. I was eligible for the Tax credit and my payments were reasonable. Now I’m saving for a Model 3 because a wise person once told me as soon as you buy a new car start saving for your next new car. Cars don’t last forever.

NPNS! SBF!
Volt#671

Meh. The tax-credit is not perfect but it works and it got passed. A direct subsidy is not politically tenable. But allowing people to ‘save more of their money’ is politically acceptable.

Yes, it helps the rich but that is fine. These technologies start at the top and work their way down. Not many had cellphones in the 1980s, just the rich . . . but the technology worked its way down. The same is true of EVs. Giving a tax-credit will accelerate it. Heck, if the tax-credit did not exist, we may have never seen the LEAF, Volt, or Tesla. And they certainly would not have been successful.

It is working.

Here is real bottom line though: Don’t mess with it. The current House/Senate will only make it worse.

Why not just get a simple rebate? Buy the car, and you get X dollars directly from the federal government? Yes, it would cost the government more as more people can take advantage of the full amount, but it also will drive adoption instead of just the well to do getting the full benefit.

And to the ones who are not well off, it’s harsh. They want to adopt that technology but have to pay nearly the full amount.

Seems like a tax cut for the well off and the poor don’t get to participate.

I’d rather a check get cut for $7500 immediately and be done with it even though, yes. I’m saying that even though I will be getting the full amount back.

“Why not just get a simple rebate? Buy the car, and you get X dollars directly from the federal government?”

Because that would NEVER pass. If you were able to get a Dem president, a Dem Congress, and a Dem Senate with a 60 seat filibuster proof majority then maybe you could pass that. But otherwise, it would never happen. That is reality in the USA.

Thanhn — Cutting a $7,500 check to 125K EV buyers in a year would be scored as a $1 billion dollar line-item worth of spending on the federal budget, and would be counted as increasing the Deficit.

A $7,500 dollar tax reduction for 125K EV buyers isn’t scored as a line-item of spending on the budget at all. As far as the spending side of the budget ledger is concerned, it is a “free” program.

In fact, under the new rules in the House, tax cuts are scored as reducing the 10 year deficit projections. That is because they now automatically score all tax cuts as if they were all economic stimulus. They then count the expected economic stimulus from the tax cut as future income.

This is how they can pretend to have a 10-year balanced budget plan through proposing all kinds of tax cuts.

Answer: Lease the vehicle. Then the $7500 rebate becomes the dealers problem. Me, I get the $2500 rebate, which, by the way, was bigger than the $1700 I put down on my wife’s EV. PLUS, that rebate comes from car license fees from the CADMV. Thus, the state of California is collecting money from poor people and giving it to ME!

Heres a thought: Why not just END the dumb a** rebate program? At least $5,000 of that $10,000 total rebate won’t go to price increases because the car makers have just been using the rebates to inflate the prices. Then another $5000 can be given back to taxpayers and stop robbing from peter to pay paul. Then another $5000 can be had from the resulting economy that actually functions instead of the overtaxed and overregulated nightmare we have in the USSA right now.

Car makers aren’t inflating EV prices at this point. GM says the 2016 Volt will finally make them money.

I admit to a great deal of ambivalence on the whole “renewing the EV subsidy” thing. On the one hand, as a (small-l) libertarian-leaning moderate who believes we should have a much smaller government than the one we have, I think any subsidy should end when the product or service being subsidized can “stand on its own”. And with nominally “200 mile” EVs coming in a couple of years, arguably that point has been reached for the EV subsidy. But on the other hand, looking at the massive indirect subsidies for falsely “cheap” gasoline, supported by the U.S. military guaranteeing our supply line, and looking at what a large fraction of our tax dollars go to support that (not to mention the blood and sweat of our soldiers)… from a -practical- standpoint rather than an idealistic one, I’d argue that instead of ending the EV subsidy, it should be massively increased, because it would be far better to spend tax dollars to get Americans off our addiction to burning oil for fuel. Far better for our economy, because cheaper transportation increases the buying power of the Dollar. Far better for our balance of trade, because we wouldn’t need to keep… Read more »

+1

First, I doubt the military is needed to secure North Dakota. However, fine, eliminate all the support for petroleum if you can find any. Let the price float to its natural level (not an artificial level supported by taxing it like cigarettes).

Then you will find you don’t need the rebate anymore.

Franco — Here is a bill to end $113 Billion in oil industry subsidies over 1 decade.

http://www.sanders.senate.gov/newsroom/recent-business/end-polluter-welfare

The funny thing is that every time somebody who is against EV subsidies claims they are also against oil subsidies, they always find a huge raft of excuses not to support bills like this.

As a liberal-progressive I agree with you, but we must be ready for the unintended consequences that might occur with the economic collapse of petro-states.

Let me get this straight…you pay $0 every year in federal taxes? And yet you have a tax accountant? I guess there’s a chance you have a “very good” tax accountant.

Let compare … say, a $50K/yr journalist to a $120K/yr engineer.

The journalist and engineer were both free to choose any careers they wanted.

One year, the journalist and engineer both buy new Volts, both for the same price.

The engineer pays $20K of income-tax that year (instead of the normal $27.5K).
The journalist pays no income-tax that year, or any year, ever.

The journalist and engineer both receive the same government benefits each year.

The engineer quietly accepts paying a 1/4 million of income-tax during his life.
The journalist who pays no income-tax feels that the situation is unfair.

Correction: The engineer quietly accepts paying a 1/2 million of income-tax during his life.

Is that something that exists? A $50,000 per year job with $0 federal income taxes paid?

The money you make has no bearing on “taxable income,” which is what the credit is based on. There are all sorts of deductions that drive down my taxable income. I must claim these deductions. It’s not optional.

No, the credit is in way way based on taxable income, it’s based on tax obligation. Per my question earlier, are you saying you pay no federal income tax in any given year?

Should read, “… Is in no way…”

Currently, I basically receive all taxes paid back at tax return time. Married filing joint. So, we already get it all back. There’s not $7,500 more in there to get back.

Why the “basically” qualifier? It’s not like $7500.00 is a trigger point you have to clear. If your income tax obligation was $6000.00, that’s the amount of credit you’d get for buying a new Volt.

Please spare us the plutocratic screed on the tax burden of our betters.

If you want to compare the percentage of income paid in taxes (all taxes, not just the federal income tax that the supply-siders complain about) by the journalist and the engineer, I’m happy to make that comparison. Let’s start with Social Security, Medicare, property taxes, sales taxes, car registration, bridge/turnpike tolls…

The wealthy have been extremely successful at lowering their tax rates while increasing the taxes on the poor and middle class. This is why things like parking violations cost hundreds of dollars today; all those upper-income tax cuts have to be paid for somehow.

And when these facts are mentioned, suddenly the cries of “class warfare!” ring out.

Open-Mind == Tax Math Fail!

A couple making $50K and taking the standard deduction, filing with a 1040EZ, would pay $4,736 in income taxes. This doesn’t include FICA taxes, any state taxes, property taxes, licensing fees, or other gov’t fees they also pay in any typical year.

Get off you high horse, and stop the martyrdom. You know who really gets off without paying much in taxes? The top 1% of the top 1% of the top 1%. This group of people have managed to cut their federal tax liability down to the single digits as a percent of their income.

Yeah, that income-tax cutoff point should have been $30K not $50K. My bad, though it doesn’t really explain your hostility. I’ve decided that the only bad thing about owning my Volt is the mostly irrational anger I receive from bloggers. Liberals resent me because I’m not a liberal, and conservatives resent me because they assume I’m a liberal.

But I digress.

My main point is still valid. That is … if you cannot use the EV tax credit because you pay no federal income taxes, then you probably shouldn’t be complaining about the people who can use the EV credit because they do pay income taxes. And yes there are many other forms of taxation, but they are all out of scope for this topic.

My parents taught me to plan and work for the life I want, and to live within my means. If I cannot afford something, then I don’t buy it. Or I work harder, so I can buy it. Many people make more money than I do… typically because they are luckier, smarter, more gifted, more risk tolerant, or harder working. I don’t envy or resent them for it.

You are wrong again. A single wage earner with 30K of income with standard deduction still pays Federal taxes. In fact, here are the details of both the income and FICA taxes:

Federal income tax $3,760.00
Social Security $1,260.00
Medicare $435.00

The reason many people don’t like you isn’t because you are a libertarian. It is because you are pretentious on top of being wrong.

Do you even know why the number of people who owe zero net income taxes went up? It is because of Tax Cuts!! The Bush tax cuts moved more people into the category of paying zero taxes because they reduced people’s taxes to the point where they paid zero taxes.

Nix, you are including all sorts of taxes that the ultra-wealthy don’t pay… therefore, those taxes “don’t count.”

For example, you mentioned Social Security and Medicare taxes; those are payroll taxes that are levied on, you know, people with actual jobs.

But if you’re part of the 0.01% and you have millions of dollars in financial assets that generate capital gains income, then not only do you pay a cushy 15% income tax on that money (equivalent to a working person making <$37K/year), but you also pay ZERO SS/Medicare tax on that.

This is why the supply-siders are always up in arms about "income tax." You never hear them mention Social Security or Medicare taxes, because they don’t pay that. And therefore, those taxes doesn’t matter!

That is true, which is why FICA should be extended to people who receive Capital Gains instead of a paycheck. Like CEO’s who get paid $1 dollar in salary, but get millions in stock options, and trust fund managers, etc. All of whom dodge FICA.

As for the way the current rebate is structured: Of course it should be changed. It never should have been set up in the first place to provide the most benefit to those who need it the least: The rich. I also think it’s counterproductive (and surely an unintended consequence?) that it promotes leasing of plug-in EVs over actually buying them.

In a perfect world, the subsidy would be changed to benefit the working poor and the middle class more than the rich. Sadly, we live in a world in which the rich have -far- more influence over Congress and the State legislatures than true democracy says they should. As a result, our tax system, our financial system, and our stock market have all been rigged to benefit the rich, especially the super-rich. Sadly, I see no signs that will change soon.

All of this is very interesting debate that will amount to nothing. Because there will be no reforms with the current Congress. Not while the party in charge has a “You Get NOTHING!” attitude towards green car incentives.

Frankly, we are lucky that we still have an incentive at all. And I wouldn’t count your tax incentive chickens past Sept. 30th of this year. Oct 1 is the start of Fiscal Year 2016, and the start of a new budget.

We have no idea if the current Congress will eliminate this tax incentive with the next budget, and have it come to an instant halt on Oct. 1st. 2015. The current Congress has done nothing to start budgeting for FY2016, and the new budget is just 6 months away from needing to be passed. What they will do is still completely unknown.

If anybody wants to be 100% certain that they get a $7500 dollar tax incentive, the only way to be sure you will get one is to buy before Oct 1st. Because any talk of reform to improve the program is foolhardy and blind to the current political realities.

I’ve not read the original article.

But let say this – the ONLY thing that is workable in the current political environment is the tax credit. It is relatively more difficult to change this every year – compared to a rebate that needs appropriation and subject to political wrangling every year.

***mod edit (statik) edited some wording at poster’s request, (= ***mod edit***

***mod edit (statik)*** above comment repaired ***mod edit***

That is correct. Under the current rules of the House, tax cuts do not need to be funded. Insanely enough, the new rules as of the beginning of this year actually give future revenue credit to all tax cuts.

But a program that paid out 1 penny more than the amount of taxes owed would need to be funded by a budget line item, and the ENTIRE amount of the program would have to be budgeted for. Even the part of the program that would be a tax cut would have to go on-budget. That would be scored as a massive spending increase under the current rules, where anything that is a tax cut is not counted as budget spending at all.

In fact, under the new rules, the Congress scores tax cuts as reducing the 10 year deficit projections, because they pretend/assume that every dollar in tax cuts will produce more revenue to the economy in stimulus, and therefore more future tax revenues. We are back to “Voodoo Economics” budgeting.

After 70 comments, not one person has mentioned “Eric is buying a Volt?!?”
I didn’t see that coming, especially over the early obsession with the Fiat 500, though I would admit the 500 would be wildly successful if Fiat allowed it to be.

I tried to stay on point earlier to the tax credit question, but I close with what some others have mentioned too. I purchased my MY2012 Volt and will keep it as an EV experiment until the wheels fall off. Had I leased it, I would be looking at the 2016 Volt now. Instead, I will be looking at the 200 mile BEVs arriving in 2017/18.

So I would recommend a used Volt before the gas prices return and wait it out for what happens in 2017/18. Who knows, the tax credit may be sorted out by then.

I do love the MY2016 Volt too though. So many EVs, so little time. I would not thought that would have been the case only four years in, but what a great problem to have, minus the tax issues.

Instead of just complaining about the current system, propose a new one. This really isn’t an op-ed, you’re just griping. How do you think a credit/rebate/discount should work? Do some research before you call this an op-ed. Use more than yourself as a reference point.

I’m not understang how you wouldn’t get the $7500 credit. My wife and I make less than $40k each. We have bought a Leaf in 2012,2013, and 2015. We got the full $7500 credit each time. I also got $1500 back when i bought my Zero S electric motorcycle. What am i missing? On my latest 2015 Lead purchase, i had 7500 to put down in advance so i only financed $17,600. And Nissan had 0% for 72 months so only $245 a month. And the dealer gave me $3k off retail and Nissan had a $4500 rebate. And theres no sales tax in NJ! Whoever said you need to make $110k a year to buy a $32k car is dead wrong. You just need to be smart about it. My $32k Leaf only cost me $17,600. And im not paying interest so i dont even worry about paying it off early. 2015 is a lot better time to buy an EV than 2012 when i had to pay full price.

This comment is so far down it is unlikely to get read, buy anyway…

I think the easiest (passable) solution would be to allow the tax credit to be carried over to future years. Just like capital losses are. A lower income earner might not get the whole credit in year 1, but they would probably get it all before they got rid of the car.

A point of sale rebate would be best, but I am not going to hold my breath on that getting passed.

I am also concerned with the first OEMs getting burned by being phased out first. That language needs to be modified. Sunset should hit all OEMs once 2 or 3 hit 200k.

Well I read it, and agree that a tax credit carryover would be much easier to pass and would solve the problem.

That option should have been further discussed as an alternative to converting the credit to a rebate.

The same applies to the typical retiree. Social Security recipients usually don’t have huge tax liabilities to claim a credit. This especially hurtful because the current BEV available is perfect for senior citizens that typically make short trips less than 10 miles from home. Plus Grandma would no longer have to fight with the rather dangerous gas pump!

I have a 2013 leased Leaf that will have $9000
residual value at the end of a 4 year lease. Nissan is finding that their projected residual values were too high and are now requiring a larger down payment of approximately $5000 to get to a $199/mo lease price.

The rebate aplied to the lease was the only way I could get into an EV. It is not the Tesla I will some how eventually be driving, but it allowed me to participate in the EV revolution.

My thought is that the rebate is far from fair or equitable, but it has been effective, because we are now progressing toward 200 mile EV’S in approximately 18 months.

My lesf wil be one more amongst many Leafs, Volts and others will be driven down into the used car market, with relatively low mileage, well maintained, safer and financeable base on fuel savings, to less fortunate low income wage earners

I have a 2013 leased Leaf that will have $9000 residual value at the end of a 4 year lease. Nissan is finding that their projected residual values were too high and are now requiring a larger down payment of approximately $5000 to get to a $199/mo lease price. The rebate aplied to the lease was the only way I could get into an EV. It is not the Tesla I will some how eventually be driving, but it allowed me to participate in the EV revolution. My thought is that the rebate is far from fair or equitable, but it has been effective, because we are now progressing toward 200 mile EV’S in approximately 18 months. My Leaf will be one more amongst many Leafs, Volts and others that will be driven down into the used car market, with relatively low mileage, well maintained, safer and financeable base on fuel savings, to less fortunate low income wage earners. I originally bought a very used 2007 Ford Escape hybrid that I planned on converting into a 40 mile plugged EV. The combined cost to purchase and convert was going be $15k. Instead I was able to get into the new… Read more »

I’ll take the unpopular stance and say that the current system is the correct one. When I bought my EV, I qualified for the tax incentive and it reduced the amount of taxes that *I* paid. That is to say that I paid less taxes. The government didn’t give me anyone else’s money to help me buy a car.

Depending on your deductions you could qualify for the full incentive with an income of just $50K. If you don’t make that much, you should not be buying a new car. Cars are a horrible place to spend money, especially new ones.

Of course, in the end, what you do with your own money is your own choice, but you should not expect others to pay for your poor choices.

With the next gen of EVs coming out, the prices on used EVs are better than they have ever been. If you are not “rolling in the dough”, this is where you should be looking if you want a new (to you) car.

I haven’t read the referenced article (yet)… but the problem I’ve had w/the tax credit is that it’s *not* a “refundable” tax credit… at least last I knew the max credit was no more than your tax liability…. for those of us retired and little or no tax liability, the credit is worthless.

and leasing is not an option, I’ve always paid for my cars in cash (I keep my cars at least 10 years… am on 16th year w/my current car)

The EV Tax Credit is really a wealth transfer mechanism from the vast majority of everyday taxpayers to Electric Car Makers to promote initial EV production.

It enables the Car Makers to sell their product for a higher price than the market would otherwise pay for.

Now that there are numerous EV producers out there, it’s no longer needed and should be eliminated.

Let the free market, i.e. car buyers, now decide if these products should be purchasedm and let the best EVs win!

I bought a 2012 Volt and got my $7500 on my 2012 federal tax form, last month I bought a 2015 Leaf. My question is will I be able to take another $7,500 tax incentive when I file my 2015 federal tax form, or is it a one time only incentive?

Go crazy Alan, as long as you have the deductions to offset the credit you are good to go.

One option not seen (did not read every response) is that if you qualify for a loan and purchase early in the year, change your W4 on dependants so your undertaxed enough to cover $7500.

Tax credits will only favor foreign car makers now.
It should only support those who have taken the risk to develop electric cars when it was not popular and profitable.