$12,500 tax credit possible?

[corradoborg]

Complete crap. Those are not subsidies. They are deductions for actual expenses. Duh. The left calls anything that is deducted as a business expenses a subsidy. Look, when I pay an employee to do a job, it is a cost of business. When Exxon explores a new oil field, the money they spend is actual cash. The "subsidy" you reference is simply the methodology by which they are allowed to recover (deduct) their actual costs. This is CASH they have spent. Not ONE DOLLAR of tax credit exists for fossil fuel - the term "Credits" in the left column is an out-and-out lie. The descriptions in the bar chart even define it as such - deductions are NOT credits. All four of those items are deductions for actual cash expenses, real outlays that the companies incur. There are NO actual subsidies for fossil fuels. None, except in the distorted nomenclature and fantasies of the green left. Spoken as a major contributor to environment causes and as an EV driver and owner of significant renewable energy production.

Man, you're hilarious.

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[vandy1981]

The oil industry has access to deductions that don't have analogues in other industries (e.g. the ability to deduct 100% of intangible costs related oil drilling). Although they are not "credits," they do have the effect of incentivizing oil exploration and production by reducing the entity's taxable income.

It's misleading to compare credits to deductions because credits provide a dollar-for-dollar reduction in tax liability whereas the impact of a tax deduction is dependent on effective tax rate of the business. Assuming the oil industry has an effective tax rate of 21% (I'd guess it's much lower), $2 billion of deductions would result in about $400 million of additional tax revenue at best.

I do agree with the spirit of @corradoborg's argument, though. Should we really be incentivizing the oil industry at this point? Why shouldn't EVGo or EA be able to deduct 100% of intangible costs and 100% of tangible costs (amortized) of charger installation?

I was trying to stay out of this one, but have to admit that I can be baited with ALL CAPS words.

 

[Blainestang]

But those aren't the options. At least not unless the proposed legislation - which currently includes both the $12,500 tax credits and big money for charging infrastructure - is changed.

It's a hypothetical for the purpose of discussion. People discuss political proposals that aren't current written in bills all the time.

Also, $12,500 tax credits aren't a guaranteed loss of $12,500 in tax revenue for every EV purchased. Many people will have a lower tax liability than that, and therefore won't get the whole $12,500.

That being said, I do see the point that tax credits lopsidedly help higher earners. I would be happier if they were direct EV price rebates. That would make EVs available to people with lower incomes. Instead of attaching potential savings to tax liability, give the program an income/net worth ceiling instead.

The new credit is written as a refundable tax credit. You get the full $12,500 (for US+Union built) even if you don't owe any federal taxes.

Point of sale would be even simpler, agreed, but it's not limited by tax liability.

Decreasing or sunsetting the incentive to buy an EV just because many of the currently available models are selling out is shortsighted. Demand for EVs is high right now specifically because of the manufacturing bottleneck. But as more EV production capacity is gained and more EV models are introduced, there will soon come a time when they are no longer routinely back-ordered at the factories. Instead, they'll be sitting on the lots next to ICE vehicles and competing with them for sales. The economies of scale won't quite have made EVs on par or cheaper than ICE vehicles yet. At the same time, the most eager group of EV buyers will have already made their purchases and (most of them) won't be looking for a new replacement for a few years. What's left in the market for new vehicles at that time will be the ICE-faithful and the ambivalent. They will need financial convincing to go electric.

I don't think it's short-sighted. The opposite, in fact.

In my opinion, $12,500 is way more than necessary. For the next few years, GOOD EVs will be sold out even with a much smaller credit.

Further, some EVs are already cost-competitive with gas equivalents without credits (MINI Cooper SE, Model 3, Taycan, Lightning, etc.) and others are with the $7500 credit or less. This will only improve as time moves on.

I think $12,500 is unnecessarily large. I think maybe $5k-$7500, but it's very diminishing returns after that. The money could give better ROI elsewhere, IMO.

 

[sotek2345]

It's a hypothetical for the purpose of discussion. People discuss political proposals that aren't current written in bills all the time.



The new credit is written as a refundable tax credit. You get the full $12,500 (for US+Union built) even if you don't owe any federal taxes.

Point of sale would be even simpler, agreed, but it's not limited by tax liability.




I don't think it's short-sighted. The opposite, in fact.

In my opinion, $12,500 is way more than necessary. For the next few years, GOOD EVs will be sold out even with a much smaller credit.

Further, some EVs are already cost-competitive with gas equivalents without credits (MINI Cooper SE, Model 3, Taycan, Lightning, etc.) and others are with the $7500 credit or less. This will only improve as time moves on.

I think $12,500 is unnecessarily large. I think maybe $5k-$7500, but it's very diminishing returns after that. The money could give better ROI elsewhere, IMO.

One difference (from a policy perspective) is that the $12,500 credit is only available for US, union built EVs. Given that, it can be looked at as $7,500 to promote EVs and $5,000 to promote US (and union) manufacturing. You can debate whether that is a good thing or not, but it isn't just about selling EVs. It is also about positioning US auto manufacturing to be ready for the conversion to EVs.

One key determinate would be if this is enough to push Ford to move Mach-e production to the states.

 

[Blainestang]

One difference (from a policy perspective) is that the $12,500 credit is only available for US, union built EVs.

Given that, it can be looked at as $7,500 to promote EVs and $5,000 to promote US (and union) manufacturing. You can debate whether that is a good thing or not, but it isn't just about selling EVs. It is also about positioning US auto manufacturing to be ready for the conversion to EVs.

One key determinate would be if this is enough to push Ford to move Mach-e production to the states.

Agreed, there's certainly more to it than just EV sales. I mentioned that the full credit was for US+Union vehicles in my post, and there's quite a bit of evidence that much of the tax credit *actually* goes to the manufacturers and not the consumer, so it's often effectively a manufacturer subsidy but people get to think it's for them. Win-win, kinda, especially for politicians that get to look like they're helping people, while also helping manufacturers.

Yes, the consumer "gets" the credit, but in many cases, the credit was built into the price.

With Tesla and GM, the effective price didn't really change after the tax credit went away. The Bolt has long been ~$25k. When they had the full credit, they could charge $32,500 so that the customer was still paying around $25k, but now they just charge $25k (COVID may have temporarily increased pricing).

Tesla lowered the prices by approximately the drop in credit as it shrunk, so the customer paid a similar amount before and after.

So, if the customer's actual final price doesn't change? Who got the credit, really? The manufacturer because they could increase the price while the credit was available.

And I agree, that's a potential benefit of a big credit. Ford may have priced the Lightning wrong, though, if the credit comes back. They maybe should have priced it higher. It's too competitive with the gas version already. But maybe they can avoid the discounts required to move the gas versions usually.

Anyway, good point and something worth considering when thinking about the credit implementation: strengthening US manufacturers to help them "win" as the world moves to EVs.

 

[greenne]

My opinion is if the US is going to get serious about EV adoption we have to convince people to trade in their gas cars for Evs. It won't simply be enough for EVs to be competitive when they intend to replace, the government has to make them see it as good deal to trade in their ICE car early. Even ICE cars are lasting longer and longer, and new car prices are getting further and further out of reach for the middle class. Thus the average age of a car is 11.9years and getting older. It will take several years(possibly a decade or more) to get a significant turnover without a financial incentive to do so.

 

[corradoborg]

The new credit is written as a refundable tax credit. You get the full $12,500 (for US+Union built) even if you don't owe any federal taxes.

Point of sale would be even simpler, agreed, but it's not limited by tax liability.

Thank you, I wasn't aware of that. Very interesting. That very well may get some EVs into some lower income households than was previously possible.

This, plus the promotion of US manufacturing and union labor, makes me even more supportive of the full $12,500 credit.

 

[FordLightning]

Unfortunately Unions are the problem. I wish the US owned companies weren’t unionized (and especially public unions).

I do like the idea of providing the highest incentive to US owned companies. Japan, Germany, and South Korea will do what they can to give their hometown an advantage. About as dumb as cash for clunkers, providing an incentive to Japan with US tax dollars.

 

[Nick Gerteis]

Unfortunately Unions are the problem. I wish the US owned companies weren’t unionized (and especially public unions).

I do like the idea of providing the highest incentive to US owned companies. Japan, Germany, and South Korea will do what they can to give their hometown an advantage. About as dumb as cash for clunkers, providing an incentive to Japan with US tax dollars.

Wow you’re so old even your misinformation is from the 80s. Let me explain: the extra credit is not for US owned companies, but for vehicles made in the US. Hence, the Mach-E, made in Mexico by Ford, wouldn’t qualify. But the Nissan Leaf, built in Tennessee, would. This extra tax credit is supposed to support American jobs, not corporations. No wonder you’re clueless about how unions have helped build today’s middle class, helping all of America along in the process.

 

[FtS]

standard liberal response... "then don't take it". Yes, the entire law is abuse of the American system and is outright theft from future generations…
Using tax incentives to generate behavior is always fraught and counterproductive, creates uneven outcomes and unintended consequences. If a thing is worth doing it is worth doing on its merits without government incentive. Paying wealthy people to do a thing that middle and lower class cannot afford, using their tax dollars to do so, is abusive and cannot be defended, full stop.

OMG first time I am seeing a republican say such a thing. The world is changing for sure.
We have seen many times people do not act rationally, especially economically, when facing multiple choices. As an Econ prof. that should be 101 to you.
I wish you were right though

 

[FordLightning]

Wow you’re so old even your misinformation is from the 80s. Let me explain: the extra credit is not for US owned companies, but for vehicles made in the US. Hence, the Mach-E, made in Mexico by Ford, wouldn’t qualify. But the Nissan Leaf, built in Tennessee, would. This extra tax credit is supposed to support American jobs, not corporations. No wonder you’re clueless about how unions have helped build today’s middle class, helping all of America along in the process.

I fully understand the credit, and I can assure you my understanding of ownership within the auto industry is far greater than yours. Where a corporation is based is the most important. It is where the corp is controlled and the majority of tax dollars are derived. Toyota would not have been willing to help us build vehicles to support our efforts in previous wars.

In terms of major players, there are only 3 US owned auto companies: Ford, GM, and Tesla. Jeep and Chrysler are owned by the French/Italians…so no, I don’t want my tax dollars subsidizing them even if they have a US factory.

 

[shamrocksteady]

I fully understand the credit, and I can assure you my understanding of ownership within the auto industry is far greater than yours. Where a corporation is based is the most important. It is where the corp is controlled and the majority of tax dollars are derived. Toyota would not have been willing to help us build vehicles to support our efforts in previous wars.

In terms of major players, there are only 3 US owned auto companies: Ford, GM, and Tesla. Jeep and Chrysler are owned by the French/Italians…so no, I don’t want my tax dollars subsidizing them even if they have a US factory.

Would you pull your head outta your ass?

 

[EaglesPDX]

In my opinion, $12,500 is way more than necessary.

More a case of data than opinion. EV's are roughly $15k more in cost and resulting sale price than equivalent ICE vehicles.

They also have range issues and other early adopter aspects that have people in a wait and see attitude when we need to incentivizing people to buy them, especially US made EV's, or US is going to be left behind as mfg and sales grow in EU and China where EV mfg and sales are mandatory.

And then there's the reason for the EV's, the climate change that has NY in a smokey haze from OR wildfires, the TX polar vortex to the unprecedented increase in hot weather nationwide, world wide. We need to be moving faster, temperatures rising.

Should be flat out $15k Federal credit that can be applied at purchase.

 

[EaglesPDX]

The new credit is written as a refundable tax credit. You get the full $12,500 (for US+Union built) even if you don't owe any federal taxes.

That would be great but descriptions of the EV tax credit show it as an expansion of current tax credit which is called a "flat tax credit" and you must have a tax liability equal to or greater than the credit to get it. It is not "full" tax credit. Hope I'm wrong as a full tax credit that all buyers could take advantage of would work much better and it addresses @PungoteagueDave concern that it only applies to the wealthy. I don't agree with that as most of GM and Nissan's tax credits went for Leafs and Volts, hardly the status cars of wealthy people. Same really for GM's current Bolts or Tesla's $40k Model 3 which is pretty close to average car price of $35k without Federal tax credit. But no matter one's interpretation of the ethics, converting to a full tax credit answers that concern.

"But this is a flat credit, which means it is only worth the full $7,500 if the individual’s tax bill is at least $7,500. If an EV buyer has a tax bill of, say, $3,000 at the end of the year, the EV tax credit can only be a maximum of $3,000. The IRS will not go over and above this total tax liability figure, and in this example, the remaining $4,500 of the EV’s total tax credit will not be useable. Furthermore, that unused portion will not apply to future years’ taxes."

 

[greenne]

That would be great but descriptions of the EV tax credit show it as an expansion of current tax credit which is called a "flat tax credit" and you must have a tax liability equal to or greater than the credit to get it. It is not "full" tax credit. Hope I'm wrong as a full tax credit that all buyers could take advantage of would work much better and it addresses @PungoteagueDave concern that it only applies to the wealthy.

Based upon the draft legislation of S.395 (The Electric CARS Act of 2021) the intent is to make the credit refundable or carried forward. I have not seen the text of "reconciliation" bill, so I guess they could have changed it, but at least initially the goal was to have it refundable. (I did post link to the standalone bill which very clearly states it can be carried forward. I think everyone is looking towards that solution...)

A Bigger Tax Credit For Going Electric: What It Could Mean For Consumers - Forbes Wheels
Text - S.395 - 117th Congress (2021-2022): Electric CARS Act of 2021 | Congress.gov | Library of Congress

Although I can't find it specifically(the bill is complex and 300+ pages long)-- multiple summaries of the "Clean Energy for America Act" say the credit for individuals is made refundable.

document_daily_05.pdf (eenews.net)
Senate Finance Committee Advances Emissions-Based Overhaul of U.S. Energy Tax Code | Davis Wright Tremaine LLP - JDSupra
The Clean Energy for America Act and Its Potential Impact on Tesla (voltequity.com)

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