Senator Joe Manchin, who has a swing vote in the US Senate, said that the Democrats have given up on the $4,500 electric car tax credit bonus for union-made EVs as part of the Build Back Better Act.
It is still unclear what reform the EV tax credit will see in the spending bill, if any.
Last year, the US House of Representatives passed the $1.9 trillion “Build Back Better” legislation, but it has been stuck in the divided Senate ever since.
The bill is interesting to the EV community because it includes a long-needed reform to the federal tax credit for electric vehicles.
Even though it is technically a small part of the overall bill, it is a point of contention.
The main goal of the reform, and the one most people agree on, is the need to eliminate the tax credit cap after automakers hit 200,000 EVs sold, since it is putting automakers that were early in pushing electric vehicles at a disadvantage. It also happens that those automakers are American automakers, like Tesla and GM, while many foreign automakers still have access to the credit.
But there are other more controversial updates to the tax credit in the version of the bill that passed the House, like an extra $4,500 on top of the $7,500 tax credit for electric vehicles built by a union workforce in the US.
This would put the few automakers that don’t use a union workforce to build cars, especially Tesla, which is also the biggest EV producer in the US, at a disadvantage.
As it currently stands, the Democrats need every single one of their senators to vote for the bill in order for it to pass.
However, Joe Manchin, a Democrat and senior United States senator from West Virginia, has been holding his vote and using it to gut many programs from the bill, including the EV tax credit reform.
Today, he confirmed that the $4,500 bonus for union-made EVs is now gone from the Senate version of the bill.
At this point, it appears that only the removal of the 200,000-unit cap by manufacturer is still on the table, but Manchin makes it sound like he would prefer if the tax credit would be gone altogether.
The weird thing here is that Manchin makes some good points, but they appear to be for the wrong reasons.
For example, he says why give a tax credit for a product there’s already so much demand for and where most models are currently back-ordered. That’s not a bad point – though this wasn’t as much the case when the reform of the tax credit was first put in place.
On the other hand, he wants to divert the money to hydrogen vehicles, which are dead in the water.
I think that there’s still a compromise to be achieved here that would make the tax credit fairer and help accelerate EV adoption.
The union-made bonus was always too much about politics and not enough about accomplishing the actual goal of the incentive, which is again to accelerate EV adoption in the US. It raised the incentive to $12,000 per electric vehicle.
I think the current $7,500 is fine. What we really need is to remove the cap in order not to put companies who were early to push for EV adoption at a disadvantage. The current version of the bill replaces the cap with a five-year period.
I think this could be negotiated down to three years, which would bring the credit to 2025.
Finally, it is accessible to individuals reporting adjusted gross incomes of $250,000 or less and $500,000 for joint filers. I think this could also be negotiated down to focus on helping lower-income people to go electric.
I think that’s all fairly reasonable.
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Author: Fred Lambert