Study Examines Consumers’ Thoughts On U.S. Federal EV Tax Credit

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MAR 16 2018 BY STEVEN LOVEDAY 69

GM’s Mary Barra and Tesla’s Elon Musk are hopeful for an expansion of the U.S. federal EV tax credit, and a new survey shows strong consumer support.

It comes as no surprise that many people support the federal EV tax credit, but now we have some hard data, compliments of Autolist. The publication reached out to us to share information from its recent study. A March 2018 survey of 1,154 vehicle owners concluded that:

  • 74% of consumers say the tax credit would affect their decision to buy an EV
  • One-third of consumers think the 200,000 vehicle cap on the tax credit should be lifted altogether
  • 63% of consumers say the $7,500 credit is important to support EV adoption in the U.S.

RELATED: Tesla To Sell 200,000th EV In U.S. In 2018, Tax Credit Phase Out Follows

The following chart shows the overall breakdown of people’s feelings about the $7,500 tax incentive:

According to Autolist, earlier research found the high price of electric cars to be a major concern for buyers. In fact, it was second only to range in a prior study. The publication also reminds us that automakers like GM and Tesla will be at a severe disadvantage to most other automakers. The way the system is currently set up, it will actually punish early adopters.

Max Tax Credit – These 19 Plug-In Electric Cars Qualify For Full $7,500 Tax Credit

Tesla Model 3

Tesla Model 3

When GM, Tesla, and even Nissan no longer have access to the tax credit, most other automakers that have been slower to move to EVs (Jaguar, Audi, Volvo, Porsche, Volkswagen, BMW, Hyundai, and Kia) will benefit from having new electric vehicles enter the market with plenty of available tax credits.

According to Autolist, its previous studies related to Tesla have found that:

  • consumers are unwilling to wait for delays in Tesla Model 3 production, something the company is currently struggling with.
  • most consumers believe Tesla is a profitable company when in fact it is deeply unprofitable; the electric car maker has posted a profit in just two of its last 35 quarters.
  • Tesla vehicles sell faster than other American car brands and that Teslas depreciate slower than their segment rivals. Even the Model 3 is projected to depreciate at a slower pace than its peers.

What are your feelings on the matter?

Keep the conversation going in our Forum. Start a new thread about this article and make your point heard.

Source: Autolist

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69 Comments on "Study Examines Consumers’ Thoughts On U.S. Federal EV Tax Credit"

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(⌐■_■) Trollnonymous

If the stoooopid gooooberment ends the tax credit, they need end the Gasoline subsides/OPEC Welfare as well.

Honestly this would be the preferred approach to me.

Raise the federal gas tax 10 cents a gallon over the next 8 quarters, remove oil subsidies, and remove the EV tax credit.

Maybe then we’d have a viable fund for our infrastructure too.

(10 cents a gallon EACH quarter, 80 cents per gallon total.)

Make it 10 cents per Quart, per Quarter, and you might get some traction!

What is OPEC Welfare?

What he is referring to is the “Dual Taxpayer Deduction” in 26 USC 901 (Sec 23) It is a piece of tax code that is used almost exclusively by the oil industry to make it so when they buy oil from OPEC nations who have state ownership of oil, that they actually generate tax credits by just purchasing oil from OPEC nations. U.S. Chamber of Commerce says “nearly all” dual capacity taxpayers are oil and gas corporations. This tax loophole allows oil and gas companies that operate overseas to classify royalty payments to foreign governments as foreign taxes, thereby reducing their U.S. taxes on a dollar-for-dollar basis. This is because foreign taxes, unlike royalty payments, are fully deductable from how much taxes you owe. This works similar to how a $7500 fed tax credit reduces how much taxes you pay by $7500 dollars, vs a deduction you get for paying taxes on your home that reduces your income. The oil companies get a loophole when operating overseas that changes the royalty payments into tax credits instead of just being a tax deduction that reduces income. This effectively has multiplied the tax benefit of deducting the royalty payments by 3X. Now… Read more »

Nix,
Thanks for this excellent explanation.

A better name is Oil Company Welfare – not OPEC Welfare – since OPEC nations do not benefit from this tax scheme as described.

The OPEC connection in this tax loophole is 2-fold: 1) The law incentivizes US oil companies to buy from OPEC nations who have state owned oil, because only nations who have nationalized their oil industry can manipulate how much they charge for the oil and how much they charge in royalties. Nations with privatized oil ownership cannot do this. The vast majority of OPEC nations have nationalized oil ownership, and are therefore the nations who benefit the most from this law. 2) That incentive comes in the form of REDUCING the taxes paid into the US Treasury by allowing oil companies to take a dollar-for-dollar tax credit for paying those same tax dollars to OPEC nations to buy oil from them. It is effectively a direct funnel of US tax dollars straight into Saudi Arabia’s sovereign wealth fund (PIF). We are paying oil companies to incentivize them to buy oil from OPEC nations like Saudi Arabia. The entire tax loophole was written and designed with the state-owned oil industries of OPEC in mind, and the tax loophole depends upon these OPEC nations for it to function. It cannot be divided from OPEC any more than it can be divided from… Read more »
By the way, this dates back to the 1950’s/60’s when US middle-eastern policy was to buy our way into influencing middle eastern dictatorships. Laws like this were all designed to provide indirect foreign aid to middle-eastern nations during the cold war to combat Soviet influence in the region. Other laws provided money for Saudi Arabia to buy US military weapons from private US companies at reduced prices that were booked as a dollar-for-dollar tax credit under another loophole that allowed defense companies to count “a foreign sovereign loss” the same way as the Dual rule. This effect was amplified by allowing defense companies to apply 100% of R&D expenses to calculating this “loss”, even if only a small fraction of sales were to that nation. Saudi Arabia was the primary recipient of these tax pass-though agreements, and later Iran under our hand picked puppet dictator installed by the CIA. These effectively redirected US Tax dollars destined for the US Treasury into foreign gov’ts on top of direct foreign aid. The fact that oil companies and defense companies also profited from this method of funneling US Tax dollars into OPEC nation’s coffers was considered just another benefit of the tax loophole… Read more »

Wow can you imagine the outrage if Tesla was given a similar deduction? Republicans would throw a major tantrum lol
Connect the dots on clean air wake up folks

Instead of asking EV credit, how about if we ask consumers about subsidy to reduce supporting countries where almost all 9/11 terrorists came from as well as those who treat women as second class citizens? I suspect the support would be almost 100%.

Add to that the subsidy also benefits an industry where US companies produce the best in the world. There are so many reasons for EV, but I think most of those 26% who were against didn’t think of all the other reasons, instead they probably thought of climate change.

Or frame it in a way where it is a tax incentive for vehicles that have powertrains that use fuel that is 100% made in the USA. You could call it the “America fuel first” tax incentive.

In order to convert some of those 26% I’d look the other way if they wanted to market EVs as running on “beautiful clean coal”.

You are brilliant…

The Legislature in the State of Wyoming, is going to find you a bureaucratic position of some sort, or a political office to occupy, if they can’t get you a first rate lobbyist position in D.C.!

Coal is King in the Cowboy State (Equality State since 1870), and still the #1 Coal producer since ’88!

I think the coal companies and coal producing states really screwed up by not pushing harder to get “clean coal” to actually work. Yes, it may have been a challenge, but I think it probably was doable with enough effort. Now without it, coal’s future is bleak.

There is no such thing as clean coal or clean diesel. BELIEVE ME
CONNECT THE DOTS ON CLEAN AIR

Not True! Coal is the Cleanest thing! Just the Cleanest thing underground! That is when it is the cleanest! Underground! Let’s just say, it stays the cleanest, when that’s where it stays!

Saudi Arabia supports the US financial system by setting the price of oil in US dollars and by dollar ‘recycling’ (investments on Wall St). They also support our ‘military’ economy with weapons purchases.

As long as the Saudis continue to do these things, don’t expect any change in the kingdom’s special treatment.

Don’t worry too much. The Saudis are completely incompetent on the battlefield, so they waste what we sell them, then they buy more.

The Yemenis are kicking their behinds fer chissake. Its like being beat by Puerto Rico.

Well, it’s always been hard to find good mercenaries.

That’s what happens when you have to hire Yemenis to do all your manual labor — like serving in the Saudi Arabian military….

(I’m not joking, there is a very high percent of non-Saudi members of the Saudi military, including Yemenis.)

Exactly. They are paying others to fight for them. Amazing how bad an army you get that way. Lets see. Not really enfranchised members of Saudi Arabia, never in fact will be allowed to be, and the top brass does not really want to get their hands dirty.

Good idea, keep until 10% of the cars are EV.

Once the current credit is cut in half for Tesla and GM, it should be cut in half for all the rest of the car makers as well. Don’t reward the laggards for dilatory business practices.
Maybe keep the $3750 credit for ALL car makers for an additional 2 years, but it has already pretty much accomplished the original goal. We now have a real electric car industry in the US. How much you want to bet that the price of GM (and eventually Nissan) plug in cars drop by $3000 after their credits get cut in half?

I like that idea as a compromise.

Cut the credit in half for everyone once Tesla/GM hit it. Then set a sunset date a few years from now for all automakers.

Over time it will save the government money, but will continue to benefit EV buyers and stimulate sales until prices have dropped sufficiently.

(⌐■_■) Trollnonymous

…..and then cut Gasoline subsides/OPEC Welfare as well.

(⌐■_■) Trollnonymous

“Once the current credit is cut in half for Tesla and GM, it should be cut in half for all the rest of the car makers as well. Don’t reward the laggards”

Totally agree!!!! +100

-100
We should not be more concerned about manufacturers than about putting more evs on the roads. That’s what the credits are for.
Best thing they can do is balance it between ev purchases and ice sells. Now at 1% to 99% ev to ice distribution add a tax of 0.5% to each ice sell and give a 50% off on evs. As the % balance change in evs favor tax the ice higher and lower the ev credits. This way you make the polluters pay for their actions by financing ev purchases and maybe make them think twice.

“add a tax of 0.5% to each ice sell”

You don’t understand the party of the current US administration, do you? “add a tax” is not even allowed to be spoken, and would be political suicide. Only D’s would suggest it, and it would never get a vote.

I think the whole design of the subsidy was bad to begin with. Why was it ever based on a certain number of cars per automaker? It should have always been a joint pool.

That being said, I think a better strategy would be a time-based incentive that gradually tapers down. Say it’s still the full $7500 in 2018, then $6500 in 2019, $5500 in 2020 and so on down to $500 in 2025 and then it’s gone. That way it’s not a sudden drop off like what we’re seeing, and it wouldn’t matter how many cars were sold.

Oh, and the subsidy should also be either made refundable or be able to be carried over to the next year.

“Subsidy” should only be for new cars under $35,000 or used cars with 10,000 miles on them and also under $35,000.

You don’t understand. The purpose of the subsidy isn’t to help poor people buy EVs. The purpose is to encourage auto makers to make EVs that can compete with gasmobiles.

Doing that by offering a subsidy which would only apply to electric vehicles too cheap for an auto maker to make money on, would be pointless. Offering a subsidy nobody would qualify for would not help anyone, and would not advance the EV revolution.

Likewise, offering a subsidy on used vehicles would not in any way encourage auto makers to make and sell EVs.

I am fine with the tax credit. Simply put a checkbox on your tax return that says “Do you wish to contribute XX percent of your tax refund to support EV rebates”.

Then watch that 63% approval rate drop like a rock off the empire state building.

..and being that that is a complete mischaracterization of how the tax credit works, it is of little note and no surprise that you would say so.

Then tell us genius. Where does the money come from? Little green fairies?

Like all tax cuts, the money could come from reduced federal spending, but actually comes from deficit spending.

Scott – I think you know this already.

Somehow when EV tax credits are mentioned, people assume their taxes will be raised to cover the difference.

Other tax cuts and tax breaks are assumed to impact the deficit. Of course, the best politicians that we can elect are incapabple of reducing spending.

Why do EV credits, and only EV credits, get this reaction? Maybe because not enough people believe they may be driving Electric someday, so they can’t imagine ever getting the credit themselves. Everyone wants tax cuts, but not for the other guy, just for them only.

GSP

The same place the nearly $200 billion INCREASE in military spending is coming from. The US Treasury borrows what the market will bear and monetizes the rest of the deficit with IOUs that go onto the books at the Federal Reserve.

Q. Where does money come from
A. It is borrowed into existence

That’s a great idea. Maybe we can ask a similar question regarding the bloated military budget and funding for endless wars.

Regarding the EV Credit:
The EV credit should be phased out slowly across the board – without regard to individual manufacturers’ EV sales numbers. Keep it at $7500 for entire tax year 2018, $5500 for TY2019, $3500 for TY2020, $1500 for 2021. The current phaseout scheme rewards the laggards, will get unnecessarily messy at tax time, and will devastate GM and Tesla EV sales later this year. Tesla is in ‘make or break’ territory for the company with the Model 3, and needs a sustained EV credit more than many here acknowledge.

You know, maybe there is something to that. I wish my tax dollars didn’t go to supporting a military budget that is probably double what it rationally should be, and which is mostly a giveaway to defense contractors.

No argument. People — taxpayers– should know right up front what you are paying for with your money. Every last red cent. Its your money being taken to run the government.

Absolutely NOT true!

I doubt the current administration nor Congress has any interest in extending the credit or reworking it. Just ask yourself what do the Koch Brothers want and that’s in line with the majority party in government.

(⌐■_■) Trollnonymous

I think they are using the Tax credit as a pawn in the game where they will use it as a sacrifice for something else they want.
That’s typical of politicians.

As written, the survey doesn’t seem to show whether or not people really are in favor of the credit. Someone could hate the idea of the credit but still answer affirmatively to all the questions asked and summarized here.

That is a feature, not a flaw.

The way it is written, every single question isn’t just another referendum on whether you support the tax incentive or not. Instead it actually measures the effectiveness of the incentive, whether the person taking the poll supports the incentive or not.

It is actually a sign of a well written poll.

I’d like to see a new pool of a million EV credits but available on a first come, first serve basis.

The current EV credit system rewards the laggards….that was a stupid design.

I like it. Make it common for all. So, whoever builds more EVs get the most credit. That will actually reward automakers for making an effort to increase volume.

How about an entirely different system that lowers the monthly payment, that’s what I really need. No interest would be a good start. And by all means stop subsidizing oil!

The whole EV tax credit idea is deeply flawed. I get that is what Congress would support, but I don’t have to like it.

By having the credit be non-refundable, it makes it so cash poor people have to lease to get any benefit. If you have to lease to afford a car that’s fine, but encouraging leasing beyond that is nuts. It would cost the government the same amount to refund the credit to everyone even if it’s beyond what they pay in taxes.

Of course, the whole idea is wrong. What we really need is to tax gasoline and diesel which would allow us to reduce taxes in other areas. The current gas tax isn’t enough to fund our roads, anyhow. A carbon tax that includes coal and methane might also be desirable, but that’s a different issue that should be considered separately.

“By having the credit be non-refundable, it makes it so cash poor people have to lease to get any benefit.” Actually, it was a very good way to keep people who have ABSOLUTELY NO BUSINESS buying ANY new car at all (ICE or EV) from getting in way over their heads in a big loan. The last thing EV’s needed were a string of news stories about yet another EV being repo’ed because people bought cars they could never afford just to get the $7500 refundable tax incentive. The other way to benefit from the tax incentive is by having the tax credit pass through to you by purchasing in the used market at current EV discounts off of new. Buy one of those lease returns, and you will effectively pocket the fed incentive passed on to you. The majority of car buyers who wouldn’t qualify for the fed incentive traditionally have been in the income range where they would buy used anyways, not new. So they can continue to buy gently used like they have been buying used ICE cars, still get the incentive passed on to them. All while not having to go underwater with huge loans.

The long term answer to EV adoption very much is direct price competitiveness without incentives. The incentives have to sunset someday.

But we aren’t there yet. However, we are much closer than a decade ago.

The rational answer would be to let the incentives partially sunset to reflect how far EVs have moved forward in the last 5 years. Sadly, nothing rational will happen under the current political climate.

I think everyone, or nearly everyone, posting here will agree that it’s counter-productive to end the subsidy for Tesla and GM, while allowing it to continue for laggard auto makers which are only just now putting EVs into production. Penalizing those companies which had the hardest jobs, blazing the trail for others to follow, certainly should not be punished for their trailblazing.

But beyond that, what I would really like to see is an end to using the U.S. military to protect our overseas supply lines of oil, and an end to using it to prop up oil-rich dictatorships and oligarchies which oppress their own people. Let Big Oil hire their own mercenaries to fight their own battles, instead of using American blood and treasure — and billions of dollars in taxpayer money — to support Big Oil’s obscene levels of profit.

If Big Oil were to hire mercenaries to fight they would be American citizens and because they are American Citizens the US Military would be used to help if they got into serious trouble, so there is no way to win with Big Oil on protecting overseas supply lines of oil. But there is one action we can all take to end Big Oil’s motivation to be in foreign lands….DRIVE AN EV TODAY PERIOD

The only hope is the Cheeto continues on his nationalist rampage and modifies the credit in an attempt to prevent foreign automakers from continuing to benefit from the credit. That or he’ll kill the credit entirely for everyone. IMO EV credit is toast.

Yep. Sad but True.

I’m not an accountant, but doesn’t a tax credit only help, if you end up owing tax at the end of the year?

And if that’s the case, I’d like to see the tax credit converted into a straight rebate.
That would certainly help EV purchases.

Not sure how the ev credit works but the pv credit i know from own experience that it really is credited to you, if you don’t owe enough at the end of the year they send you a check with the difference. I’m inclined to think ev credit is the same.

Nope, the $7500 tax credit is capped at your actual tax liability.

For example, if you are married with a household income of $70K per year (this happens to be the household income of the typical new car buyer) and after deductions you had a Taxable Income of $50K, you would only get $6,576 dollars of the $7,500 tax credit.

That is because you would only owe $6,576 dollars of taxes on $50K of Taxable Income, and you wouldn’t be eligible for the rest of the tax credit. And you can’t carry it over to the next year either.

If you’ve already had $6,576 in W2 tax witholdings in your paychecks, you would get all that money back as a tax refund check.

We need to be clear on the concept of ‘what you owe’. Some people interpret this to be the amount on the check they send to the IRS if they owe additional taxes than were withheld. The tax form even refers to it as the ‘Amount You Owe’.

To be clear, this ‘Amount You Owe’ – i.e., the amount on the check you send to the IRS for what you might owe in additional taxes – has no bearing on the EV tax credit amount. What matters is your Total Tax. If your Total Tax is $7500 or more, you will qualify for the entire $7500 credit.

Steven,

The idea is that if you have an income significantly lower than what you would need to qualify for most or all of the $7500 incentive, then you probably don’t have sufficient income to afford to outright purchase a brand new car.

There is a concept in tax law where an incentive shouldn’t unduly incentivize people into making poor financial decisions that will ultimately harm them. Like pushing someone into a new car loan that is more than they can afford with their income.

The upside is that people don’t end up having their nice EV’s repo’ed because they got into a loan they couldn’t afford just to get a tax incentive. The downside it that the law is regressive in nature. Lawmakers mitigated this by allowing it to be applied to leases too, providing this as the avenue to make it less regressive and more accessible to people with less income than the median household income of the median new car buyer.

I know a retired friend whose only income is from unwinding his stock portfolio i.e., selling off stocks. His income consists exclusively of capital gains and dividends approaching $100k per year. His income tax liability is zero. He therefore gets zero EV tax credit – even though he pays cash for all his vehicle purchases. He certainly doesn’t benefit from the government ‘protecting’ him from making poor financial decisions.

That suggests then that he should lease, get the credit that way, and if he likes, he could pay cash for the full lease costs, up front! It seems the leasing company tax credit pass through will still benefit him that way.

He could also pay the buy out at the end, either at the lease end, or up front, and still get the $7,500 benefit, it seems!

Very good observation. Leasing is an excellent option in his case.

It’s OK to have a tax credit. I believe $7,500 is a bit excessive. If the cost is too much for a consumer then it’s too much. The US has given car makers $$$ billions to develop the technology, billions for charging infrastructure, then we subsidize the consumers to purchase. Too much.

It’s all costing the taxpayers billions. If you want an electric car go buy one right now there are only 10 true electric cars to select from.

Billions for 700,000 electric cars on the road today. The past two months the “electric only cars” not duel fuel only sold 25,000 cars. The consumer demand is not there yet. A family of 4 with luggage can’t fit in these- it’s a commuter car or local errand car.

The US consumer wants big vehicles, a family with two or more vehicles may consider EV, for the average consumer today’s offerings are not practical