Senate Pushes for $40,000 Cap on EV Tax Credit
Just days after a White House EV event that saw the signing of an executive order aimed at bringing sales of battery-electric vehicles, plug-in hybrids and hydrogen fuel-cell vehicles to 50% by the year 2030, the U.S. Senate has approved an amendment that could greatly limit the $7,500 federal tax credit available to EV buyers.
This week the upper chamber passed a non-binding budget amendment that would limit the current $7,500 tax credit to vehicles with a price under $40,000. The measure also restricts the availability of the benefit to households with an income below $100,000. The budget amendment has passed the Senate 51-48, but has yet to pass the House in order to take effect.
The measure itself could dramatically cut the availability of the $7,500 federal tax credit.
“During consideration of the budget on the Senate floor, Senator Fischer offered an amendment that would prevent Americans who make over $100,000 a year or who are buying an electric vehicle that costs more than $40,000 from claiming the electric vehicle tax credit,” the office of Sen. Deb Fischer (R-Neb.), who introduced the amendment, said in a statement.
“While enough Democrats at least agreed to prevent those with six-figure incomes from getting tax credits for luxury vehicles, many Republicans question whether the federal government should be subsidizing this industry in the first place,” Fischer’s office added.
The budget amendment, if it subsequently passes the House as well, would have some pretty serious ramifications for buyers of EVs.
First, there is a finite variety of EVs on the market with a starting price below the $40,000 mark, while the number of EVs priced between $40,000 and $60,000 is about to increase. Second, limiting the tax credit to households that make less than $100,000 a year could represent an even more meaningful reduction in its availability to buyers, as many families with two earners making five figures but over $100,000 taken together are a fairly substantial demographic. The combined effect of these two narrowing measures could effectively reduce the incentives’ availability largely to single households who buy one of several less expensive EVs, just as the average price of new cars keeps rising.
What’s the goal, to sell more EVs or to avoid the bad optics of giving rich people discounts on cars? Hard to do both here
Non-Tesla Q2 EV:
– MSRP <$40K: 20% (avg $55K)
– HHI (census) <$100K: 55%
Can’t put those two together but it’s easy to see that result is <20% of EV sales https://t.co/SJNdc9Odjq
Among other things, this raises the question of just how many households making under $100,000 are buying new EVs in the first place during a historic economic downturn sparked by the pandemic. This measure also raises the issue of how much of a motivating factor the $7,500 tax incentive, which is not a point-of-sale coupon at all, really is for buyers.
Needless to say, there are not that many EVs on the market at the moment that leave the dealerships priced below $40,000 out the door once options, destination charges and taxes are added, and the industry trend at the moment isn’t favoring a wave of competitors to smallish hatchbacks like the Chevy Bolt, if you’ve been keeping current with the latest EV debuts.
While some less pricey electric crossovers are certainly on their way, or have debuted earlier this year like the Volkswagen ID.4, a great wave of inexpensive electric hatchbacks isn’t on the horizon.
If you’re shopping for an EV at the moment, is the $7,500 tax credit a motivating factor in your purchase? Let us know in the comments below.
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