Federal EV tax credit: unnecessary, inefficient, unpopular, costly, and unfair

In April, Senator Debbie Stabenow (D-MI) introduced the Drive America Forward Act, a bill that would expand the tax credit for new plug-in electric vehicles (EVs) by allowing an additional 400,000 vehicles per manufacturer to be eligible for a credit of up to $7,000. Currently, the tax credit is worth up to$7,500 until a manufacturer sells more than 200,000 vehicles. In late September, groups that stand to benefit from the extension of the federal tax credits wrote to Senator McConnell and other leaders in Congress, encouraging them to support on the Drive America Forward Act. As IER has documented in the past, lawmakers should not extend the EV tax credit as the policy is unnecessary, inefficient, unpopular, costly, and unfair.

Unnecessary and inefficient

The EV tax credit is not necessary to support an electric vehicle market in the U.S. as one group estimates that 70 percent of EV owners would have purchased their vehicle without receiving a subsidy, which is reasonable seeing as 78 percent of credits go to households making more than $100,000 a year.  Furthermore, the federal tax credit overlaps with a number of other government privileges for EVs, including:

  • State rebates and/or other favors (reduced registration fees, carpool-lane access, etc.) in California, as well as in 44 other states and the District of Columbia.
  • Tax credits for infrastructure investment, a federal program that began in 2005 and, after six extensions, expired in 2017.
  • Federal R&D for “sustainable transportation,” mainly to reduce battery costs, averaging almost $700 million per year.
  • Credit for EV sales for automakers to meet their corporate fuel economy (CAFE) obligations.
  • Mandates in California and a dozen other states for automakers to sell Zero-Emission Vehicles—a quota in addition to subsidies.

Even if the federal tax credits were needed to support demand for EVs, the extension of the tax credit would be an absurdly inefficient means of achieving the stated goal of the policy, which is ostensibly to lower carbon emissions. The Manhattan Institute found that electric vehicles will reduce energy-related U.S. carbon dioxide emissions by less than 1 percent by 2050.

Unpopular

Lawmakers should be aware that the vast majority of people do not support subsidizing electric vehicle purchases. The American Energy Alliance recently released the results of surveys that examine the sentiments of likely voters about tax credits for electric vehicles. The surveys were administered to 800 likely voters statewide in each of three states (ME, MI and ND). The margin of error for the results in each state is 3.5 percent.

The findings include:

  • Voters don’t think they should pay for other people’s car purchases. In every state, overwhelming majorities (70 percent or more) said that while electric cars might be a good choice for some, those purchases should not be paid for by other consumers.
  • As always, few voters (less than 1/5 in all three states) trust the federal government to make decisions about what kinds of cars should be subsidized or mandated.
  • Voters’ sentiments about paying for others’ electric vehicles are especially sharp when they learn that those who purchase electric vehicles are, for the most part, wealthy and/or from California.
  • There is almost no willingness to pay for electric vehicle car purchases. When asked how much they would be willing to pay each year to support the purchase of electric vehicles by other consumers, the most popular answer in each state (by 70 percent or more) was “nothing.”

The full details of the survey can be found here.

Costly and unfair

Most importantly, an extension of the federal EV tax credit is unfair as the policy concentrates and directs benefits to wealthy individuals that are predominantly located in one geographic area, namely California. A breakdown of each state’s share of the EV tax credit is displayed in the map below:

In 2018, over 46 percent of new electric vehicle sales were made in California alone. Given that California represents only about 12 percent of the U.S. car market, this disparity means that the other 49 states are subsidizing expensive cars for Californians.  However, in order to understand the full extent of the benefits that people in California are receiving, some further explanation is in order.

When governments enact tax credit programs that favor special businesses without reducing spending, the overall impact is parallel to a direct subsidy as the costs of covering the tax liability shift to the American taxpayer or are subsumed in the national debt (future taxpayers). California offers a number of additional incentives on top of the federal tax credit for electric vehicles that are also driving demand for EVs in the state. These incentives include an additional purchase rebate of up to $7,000 through the Clean Vehicle Rebate Project, privileged access to high-occupancy vehicle lanes, and significant public spending on the infrastructure needed to support EVs. Therefore, the additional incentives that California (and other states) offer to promote EVs have broader impacts as these policies incentivize more people to make use of the federal tax credit, passing their costs on to American taxpayers. In other words, you’re not avoiding the costs of California’s EV policies by not living in California.

This problem is made even worse when we consider the impact of zero-emission vehicle (ZEV) regulations, which require manufacturers to offer for sale specific numbers of zero-emission vehicles. As recently as 2017, auto producers have been producing EVs at a loss in order to meet these standards, and they have been passing the costs on to their other consumers. This was made apparent in 2015 by Bob Lutz, the former Executive Vice President of Chrysler and former Vice-Chairman of GM, said:

“I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65,000 now. Yukons are in the $70,000. The Escalade comfortably hits $100,000. Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”

Fiat Chrysler paid $600 million for ZEV compliance credits in 2015 (plus an unknown amount of losses on their EV sales), and sold 2.2 million vehicles, indicating Fiat Chrysler internal combustion engine (ICE) buyers paid a hidden tax of approximately $272 per vehicle to subsidize wealthy EV byers. ICE buyers were 99.3 percent of U.S. vehicle purchases in 2015. So, even if half the credits purchased were for hybrids, each EV sold in 2015 was subsidized by more than $13,000 in ZEV credit sales, in addition to all of the other federal, state, and local subsidies.

As is typical with most policies that benefit a politically privileged group, the plan to extend the federal tax credit program comes with tremendous costs, which are likely being compounded by people abusing the policy.  One estimate found that the overall costs of the Drive America Forward Act would be roughly $15.7 billion over 10 years and would range from $23,000 to $33,900 for each additional EV purchase under the expanded tax credit. Seeing as the costs of monitoring and enforcing the eligibility requirements of the EV tax credit program are not zero, it should surprise no one that the program has been abused as it has recently come to light that thousands of auto buyers may have improperly claimed more than $70 million in tax credits for purchases of new plug-in EVs. Finally, additional concerns arise over the equity of the federal EV tax credit due to the fact that half of EV tax credits are claimed by corporations, not individuals

End this charade

When the tax credit was first adopted, politicians assured us that the purpose of the program was to help launch the EV market in the U.S. and that the tax credit would remain capped at the current limit of 200,000 vehicles. At that time, we warned that once this program was in place, politicians would continue to extend the cap in order to appease the demands of manufacturers and other political constituencies that were created by the program. A decade later, we find ourselves in that exact situation. At this point, it should be clear that Congress should not expand the federal EV tax credit as the program is nothing more than an extension of special privileges to wealthy individuals and corporations that are mostly located in California. If Congress can’t find the courage to put an end to such an unfair and inefficient policy, President Trump should not hesitate to veto any legislation that extends the federal EV tax credit, as doing so would be consistent with his approach to other energy issues such as CAFE reform.


AEA to Senate: Highway Bill is Highway Robbery

WASHINGTON DC (July 30, 2019) – Today, Thomas Pyle, President of the American Energy Alliance, issued a letter to Senate Environment and Public Works Committee Chairman John Barrasso highlighting concerns about the recently introduced America’s Transportation Infrastructure Act. Included in the legislation is an unjustified, $1 billion handout to special interests in the form of charging stations for electric vehicles.  AEA maintains that provisions like this are nearly impossible to reverse in the future and create a regressive, unnecessary, and duplicative giveaway program to the wealthiest vehicle owners in the United States. 
 
Read the text of the letter below:
 

Chairman Barrasso,

The Senate Committee on Environment and Public Works is scheduled to consider the reauthorization of the highway bill and the Highway Trust Fund today.  At least some part of this consideration will include provisions that provide for $1 billion in federal grants for electric vehicle charging infrastructure.  This is among $10 billion in new spending included in a “climate change” subtitle.  All of this new spending is to be siphoned away from the Highway Trust Fund (HTF), meant to provide funding for the construction and maintenance of our nation’s roads and bridges.  The HTF already consistently runs out of money, a situation that will only be exacerbated by these new spending programs.

We oppose this new federal program for EV infrastructure for a number of reasons, including, but not limited to the following:

  • The grant program, once established in the HTF, will never be removed.  Our experience with other, non-highway spending in the trust fund (transit, bicycles, etc.) is that once it is given access to the trust fund, the access is never revoked.  Our nation’s highway infrastructure already rates poorly in significant part due to the diversion of highway funds to non-highway spending.
  • As we have noted elsewhere, federal support for electric vehicles provides economic advantages to upper income individuals at the expense of those in middle and lower income quintiles.  This grant program would exacerbate that problem.
  • This program will result in taxpayers in States with few electric vehicles or little desire for electric vehicles having their tax dollars redirected from the roads they actually use to subsidize electric vehicle owners in States like California and New York.
  • This program is duplicative.  There is already a loan program within DOE that allows companies and States to get taxpayer dollars to subsidize wealthy electric vehicle owners.

For these and other reasons, we oppose the provisions that would create a regressive, unnecessary, and duplicative giveaway program to wealthy, mostly coastal electric vehicle owners.  This giveaway not only redirects taxpayer money from the many States to the few, in looting the Highway Trust Fund it also leaves those many States, including Wyoming, with less money to maintain their own extensive road networks.


Sincerely,

Thomas J. Pyle

Unregulated Podcast #18: Tom and Mike Unpack a Busy First Week for 2021

On this episode of Unregulated Tom & Mike discuss the action packed first week of 2021. From the storming of the Capitol Hill, to the results of the Georgia senate election and the re-election of the RNC chief find out what it all means for 2021.

Links:

For first time in 5 years, US gas mileage down, emissions up (USA Today)

Mike’s latest columns

Georgia Results Mirror the Nation: Still Deeply Divided


Democrats poised to take functional control of Washington,
but still no mandate for fundamental transformation or Green New Deal
.


WASHINGTON DC (January 6, 2020) – The American Energy Alliance (AEA) is the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization. Thomas Pyle, AEA’s president, released the following statement in response to the U.S. Senate elections in Georgia:

“Congratulations to the apparent winners of the U.S. Senate elections in Georgia, Ralph Warnock and Jon Ossoff. We look forward to working with them and all members of the 117th congress to ensure that Americans always have an abundant supply of affordable, reliable energy and the 6.8 million Americans who deliver that energy continue to have access to the high-paying, dependable jobs that have enabled them to provide a comfortable life for their families.

“We look forward to working with Rev. Warnock and Mr. Ossoff to ensure that energy is not made more expensive for everyone simply to provide emotional satisfaction for a select few. After all, when energy prices increase, it is the poor, the elderly, those on fixed incomes, and the marginalized who suffer the most. Surely the incoming Congress is not interested in further harming those important constituencies, especially in these difficult times.

“With their apparent victories in Georgia, the Democrats are poised to take functional control of Congress along with the White House. Let us all hope they don’t lose sight of the fact that they will be governing a deeply divide nation with the narrowest of margins in both legislative chambers. That is hardly a license for a fundamental transformation of our economy or the energy system in this country.”


Additional Resources:


For media inquiries please contact:
JON HAUBERT | 303.396.5996

Putting an End to Secret Science Pivotal to Restoring Trust in Government


EPA can finally put an end to history of cherry-picking research to support a predetermined, political outcome


WASHINGTON DC (January 5, 2021) – The American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, threw its support behind the announcement from EPA Administrator Andrew Wheeler limiting “secret science” in the agency’s public policy making process made common by the Obama administration. 

The new rule establishes how the EPA will consider studies relying on dose-response data, which form the basis for many of its significant regulatory actions and influential scientific information. Dose-response approaches are common when the agency is attempting to determine “safe” or “hazardous” settings or levels, especially as it relates to dosages for drugs, pollutants, foods, or other substances connected to human or environmental exposure. EPA’s new rule, Strengthening Transparency in Regulatory Science, focuses primarily on giving greater consideration to studies where the underlying dose-response data are available in a manner sufficient for independent validation. For too long, public review of the data supporting EPA’s key findings of what’s deemed safe, and what’s hazardous, has been limited by a too-common habit of keeping the underlying data private, even from the EPA itself. The rule seeks to end default, secretive practices and instead encourage greater transparency.

EPA Administrator Andrew Wheeler outlined the reasoning of this final rule in an Op-Ed  published in the Wall Street Journal yesterday noting, “The work of the Environmental Protection Agency—to protect human health and the environment—shouldn’t be exempt from public scrutiny. This is why we are promulgating a rule to make the agency’s scientific processes more transparent. Too often Congress shirks its responsibility and defers important decisions to regulatory agencies. These regulators then invoke science to justify their actions, often without letting the public study the underlying data. Part of transparency is making sure the public knows what the agency bases its decisions on.”   

Thomas Pyle, President of the American Energy Alliance, issued the following statement supporting the Strengthening Transparency in Regulatory Science rule:

“It is difficult to disagree with Administrator Wheeler’s sentiment that transparency knows no political ideology. As noted in the release of this rule, no individual’s private information will be released, citing a process that can verify results with independent review and still protect confidential and personal information striking an important balance between transparency and privacy when it comes to our health and environment. 

“For too long, some in the scientific community have sought to abuse the process to manipulate a predetermined outcome. It’s a shameful practice that must come to an end and shedding light in the dark swamp that Washington DC has become will only help. 

“Just as laws are meaningless without enforcement, transparency is just a political buzz word without proper review. Sadly, restoring trust in government appears an impossible task these days but this rule is a step in the right direction and sets up a future where citizens can verify the information the government is using when making decisions about their health.”

Additional Resources:


For media inquiries please contact: 

JON HAUBERT | 303.396.5996

Unregulated Podcast #17: Tom and Mike Welcome Their First Guest and Share Their Final Thoughts for 2020.

Unregulated Podcast #16: Tom and Mike Discuss the ‘Coronabus’ and the Rise of the ‘Direct Action’ Coalition

Once Again, Congress Reaches Into Taxpayer Wallets for the Renewable Energy Lobby


Inclusion of corporate welfare and unnecessary tax extensions a major mistake.


WASHINGTON DC (December 21, 2020) – The American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, released the following response to news that Congress has agreed to include special green giveaways for the powerful renewable energy lobby – which has already drained billions of dollars from taxpayers – as a part of its latest omnibus spending bill.

Thomas Pyle, President of the American Energy Alliance, issued the following statement:

“Christmas has come early for the renewable energy lobby, as Congress has once again reached into taxpayers’ wallets to generously subsidize wind, solar, and biofuel producers. Particularly shameful is the year-long extension of the production tax credit for onshore wind, which the industry had promised to phase-out but continues to go back on their word. On the one hand, the wind industry constantly claims they are now the lowest cost option for electricity generation, and on the other, they continue to spend millions lobbying Congress to send them billions in taxpayer subsidies. If wind is such a good deal for electricity generation, why does the industry keep coming back to Congress with their hand out?”
 
“It is a disgrace how Congress operates these days. Both parties do nothing all year long except trade insults and then, in a lame duck session, they leap into bipartisan action by slipping a laundry list of special interest giveaways for their friends on K Street into a year-end must pass bill to fund the federal budget. This year’s winter windfall might be good for wind, solar, biofuels, and an already bloated federal energy bureaucracy, but it is bad for the rest of us.”

Additional Resources:


For media inquiries please contact: 

JON HAUBERT | 303.396.5996

Unregulated Podcast #15: Tom and Mike Discuss More Cabinet Picks and North Face Hypocrisy

AEA Urges Senate and House Leaders to Reject “Sense of Congress” Nonsense


Stealth Green New Deal language being slipped into take-it-or-leave-it spending package.


WASHINGTON DC (December 14, 2020) – The American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, sounded the alarm today on a proposed Sense of Congress resolution that if adopted, could cause a major disruption of America’s energy system.

AEA has obtained a page from a discussion draft dated December 13 at 5:28 PM that appears to include a provision from the Green New Deal-like energy legislation, H.R. 4447, making it a “Sense of Congress” to call for 100% of power demand to come from “clean, renewable, or zero-emission” energy sources. Information around these terms, or how they would be implemented, appears to be left intentionally vague. Putting Congress on record supporting 100% renewables is a major statement of policy and it should not be tacked onto a massive spending bill with no discussion or debate warns AEA. To make matters worse, this provision appears to give the Secretary of Energy a blank check authorization from Congress to impose 100% renewables.

Thomas Pyle, President of the American Energy Alliance, issued the following statement:

“While most Americans are eagerly looking for news about access to a COVID-19 vaccine, or juggling their expenses and schedules this holiday season, some unnamed Members of Congress are making a last-minute attempt to to sneak bad energy policy into a take-it-or-leave it spending bill before checking out for the year. It’s shameful and should be rejected outright.

“Members of the House of Representatives and the Senate are negotiating behind closed doors to jam a a stealth Green New Deal provision into a massive year-end bill to fund the entire federal government. Language uncovered in a “discussion draft” would give the Secretary of Energy the authority to effectively change the Department of Energy into the Department of Climate Policy.

A major policy shift and resulting disruption of America’s energy system should never occur as the result of a backroom deal to secure a legacy legislative item for an outgoing chairperson. It should be fully transparent, debatable, and subject to amendment. It’s no wonder that Americans are losing faith in their government institutions.”


For more information, see our latest blog: The Stealth Green New Deal

For media inquiries please contact:
JON HAUBERT | 303.396.5996

The Stealth Green New Deal

As negotiations continue on a year-end government funding bill as well as a new round of coronavirus relief spending, bad energy policy is looking to hitch a ride. The zombie Manchin-Murkowski energy bill, which we call the American Energy Bureaucracy Act, has staggered back into the picture. In the fall, the bill got even worse after an agreement was reached to enrich big corporations at the expense of small businesses and individual consumers. A marriage of corporate bootleggers and green Baptists, with regular Americans forced to foot the bill.

The word on the street is that there are negotiations taking place to try and jam a pre-negotiated energy bill into the year-end spending bonanza. AEA obtained a page from the discussion draft that appears to include a provision from the House Green New Deal lite version of energy legislation, H.R. 4447, making is a “Sense of Congress” that calls for 100% of power demand to come from “clean, renewable, or zero-emission” energy sources. While these terms are conveniently not defined, from the wider messaging of environmental activists we know what they mean by that: replace electricity from natural gas and coal with expensive, unreliable wind and solar power. If included, this amounts to a backdoor 100% renewables mandate, snuck into a huge omnibus spending bill that they hope no one notices.

Forcing renewables onto the grid raises electricity costs and makes the grid less reliable. We only have to look at what has happened repeatedly this year in California to see the 100% renewable future: rolling power cuts at times of high demand and low renewable generation. And the California disaster is with a grid that is only partially renewable. Imagine facing power shortages because of dependence on renewables and deciding that we should become even more dependent on renewables.

This 100% provision “Sense of Congress” makes no sense whatsoever. Putting Congress on record supporting 100% renewables is a major statement of policy. It cannot be tacked onto a massive spending bill with no discussion or debate. Perhaps the drafters (and we call on you to reveal yourselves) wanted to make it sound bland, but the very vagueness of the language is especially dangerous. This provision basically gives the Secretary of Energy a blank check authorization from Congress to impose 100% renewables in whatever way he can.

If this is the sort of radical language being included in the energy package, then it needs to be debated and voted on as separate legislation, not slipped into a large take-it or leave it spending bill. A major disruption of America’s energy system cannot come from a backroom deal. Once again, Congress is showing why the American people have so much distrust in their institutions. Congress should scrap this backroom deal and go back and watch Schoolhouse Rock.

Unregulated Podcast #14: Tom and Mike discuss Biden appointees and corruption at the CPUC

On this episode of Unregulated Tom & Mike discuss the growing list of Biden cabinet picks and the rampant corruption of the California Public Utilities Commission.

Links:

Sonrkin and Santelli debate restaurant restrictions

Mike’s latest columns

Percent Share of US EV Sales By State

California was the largest net electricity importer of any state in 2019