Electric-Car Tax Credit Efforts Running Out of Juice in Congress

The key members leading the push to lift the cap won’t be back next year.

AP Photo/Chuck Burton
Nov. 15, 2018, 8 p.m.

Americans in the market for electric vehicles are set to lose a big tax break in the coming months despite a reinvigorated auto-industry push to keep it intact.

Tesla, General Motors, and Nissan spearheaded the formation of a coalition this week to lift the cap on an electric-vehicle tax credit, and lawmakers on both sides of the aisle are backing legislation to do the same.

But the outlook for a tax package in the lame-duck session is increasingly bleak as only about a dozen legislative days remain this Congress. Key Democrats say Republicans aren’t pushing forward proposals.

That package, which could include a set of tax extenders and technical corrections to the 2017 GOP tax law, is likely the only vehicle for an electric-vehicle measure. Now, a set of lawmakers who had hoped to cement parochial legacies with legislation to lift the credit cap are starting to admit that the effort is all but dead.

“There’s no plan right now that I know of,” Rep. Mike Bishop, who represents a district near the Detroit, told National Journal. “As I stand here I would guess that that’s not a [priority].”

Electric-car makers are only allowed to offer a tax credit of up to $7,500—depending on vehicle specifications—for the first 200,000 vehicles they sell. Buyers can file for the credit in their tax returns rather than at the point of sale.

And as production of electric vehicles ramps up, manufacturers such as General Motors and Tesla are hitting that cap. In July, Tesla said it was close to reaching the cap and would then need to begin the one-year phaseout of the tax break for future sales.

Meanwhile, a spate of electric vehicle legislation has steadily surfaced in recent weeks and months. Bishop co-sponsored legislation, introduced last month, that would ax the credit cap but launch an industry-wide phase-out for the credit in 2022.

Rep. Diane Black, a member of the tax-writing House Ways and Means Committee and a former Budget Committee chairwoman, leads that bill. A Nissan plant just outside Black’s Nashville district produces Leaf, an electric compact car. Meanwhile, Sen. Dean Heller, whose state of Nevada is home to Tesla’s Gigafactory, sponsors companion language in the Senate.

Those three lawmakers, some of the most active Republican defenders of the credit, won’t be returning to Congress in January. Black gave up her seat to run unsuccessfully for Tennessee governor. Democratic challengers took down Bishop and Heller at the polls last week.

And to add insult to injury for those lawmakers, a push to kill the credit entirely is also gaining some subtle steam. Sen. John Barrasso, an influential member of Senate Republican leadership, introduced legislation to do that last month. Sen. Pat Roberts, a member of the tax-writing Senate Finance Committee, jumped on board the legislation this week.

“I’m just not in favor of having tax credits for specific entities. I think that’s not the way to do it,” Roberts, a proponent of ethanol and other biofuels, told National Journal.

The bill would also implement an electric-vehicle user fee that would be collected through tax filings and funneled to the Highway Trust Fund. The fund is notoriously insolvent, and some lawmakers criticize the lack of contribution from electric-vehicle owners. The fund is largely financed through the federal gas tax.

An overhaul of vehicle fees is often debated on Capitol Hill, but alternative proposals aren’t fully baked and there is a lack of consensus on the issue.

Even proponents of the Barrasso legislation admit it has virtually no chance of passage this year. Still, Alex Hendrie, director of tax policy at Americans for Tax Reform, says the next several weeks likely offer the only window for action on the electric-vehicle credit until at least late next year. Tax-extender bills often move at the end of calendar years.

“I don’t know when the next opportunity will be,” said Hendrie. “It’s kind of a now-or-never kind of thing. Now or sometime in the uncertain future.”

Broadly, the tax credit is a minor provision, though it carries political significance and parochial interests for some lawmakers. The Joint Committee on Taxation estimates that the current tax will cost the federal government $7.5 billion from 2018 to 2022. The most recent IRS data found that in 2016, about 60,000 taxpayers filed for the credit.

Over the past decade, sales of electric vehicles boomed as advancements in motor efficiency and battery technology allowed cars to travel farther between charges. Overall U.S. sales jumped from 52,000 vehicles in 2012 to 200,000 vehicles in 2017, with Tesla’s fleet of cars, Chevrolet’s Bolt, Toyota’s Prius Prime, and the Leaf making up the bulk of orders, according to InsideEVs.com.

Rep. Kevin Brady, the outgoing House Ways and Means Committee Chairman, said Tuesday that he would like to move another bill on extenders—the mishmash of temporary breaks that range from biofuel tax credits to breaks for racehorses—before he hands the gavel over to the Democrats in January. Brady, a vocal critic of extenders, has pledged to cull the list and allow some to expire in any future bill. Brady said he has been working on a draft package that would phase out some of the extenders and eliminate others, and another draft has about 70 to 80 technical corrections he is close to showing lawmakers. But as for moving the tax legislation in the lame-duck session, Brady said he was “prepared and ready” if there was an opportunity to move legislation.

"What I can't predict is how long this lame-duck will go and what appetite there is," Brady told reporters Tuesday. "As you know, these things are very unpredictable. They can go a week or two or they can go to New Year's Eve."

Critics say the electric-vehicle tax credit is regressive because it only benefits affluent drivers who can afford electric cars, which carry a price premium over their gas-fueled peers. The base price for a 2018 Tesla Model S sedan is $77,000. Its less expensive cousin, the Model 3, still clocks in at $46,000. Supporters say the credit is still essential to fostering an emerging green technology.

Despite Brady’s potential support for new tax package, Sen. Ron Wyden, the top Democrat on the Finance Committee, told reporters Tuesday that Republicans have been missing in action.

“We’ve had weeks of these kind of elliptical statements about great things that are going to happen on taxes but they have never presented to me a piece of paper,” he said. “The majority have not given us in any way, shape or form a piece of paper indicating what they might want to do in either central area, technicals or extenders.”

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