Trump budget would eliminate tax credit for electric vehicles

Trump's budget would cut $126 billion or 5 percent from non-defense federal government spending. Cuts would include doing away with the plug-in vehicle tax credit altogether, a credit that can give EV buyers up to $7,500 back on their federal tax bill.

Kudlow on eliminating the EV tax credit

Larry Kudlow, Trump's economic adviser said that ending the tax credit could save the government $2.5 billion over the course of a decade. Back in December Kudlow told reporters: “As a matter of our policy, we want to end all of those subsidies.” He said then that the Trump administration intended to end subsidies that had been introduced during the Obama administration.

Automakers have lobbied to have EV tax credits extended

A recent article notes: "Major automakers have been lobbying Congress to extend the credit that phases out after companies hit 200,000 vehicles sold. They are hopeful Congress could expand the benefit by including it in a package of extended tax provisions that would otherwise expire that could win approval this year."

The present credits start to decline after the sale of 200,000 eligible EVs. Both GM and Tesla have reached that level. Tesla had the amount of the credit reduced from $7,500 to $3,750 at the beginning of this year. GM reached the 200,000 level last October with its tax reduction being halved starting at the beginning of March this year. Automakers say extending the tax break for all makers would level the playing field.

The tax credits now are quite limited in their cost because they phase out after the 200,000 sale level but if the tax credits were extended back to all auto makers the government costs would soon become much higher especially as sales increase. If foreign makers also got the credit the cost would be even more. However, on the positive side it would encourage the trend to green energy vehicles that do not pollute through using fossil fuels. No doubt Trump would not countenance giving the credit to foreign auto makers.

Trump is eliminating other clean energy incentives

At present the Energy Department provides low interest loans to automakers to develop more efficient technology. Tesla, Ford, GM, and Chrysler-Fiat have all taken advantage of this program. It has helped them develop batteries, and hybrid systems, and improve car mileage. The Trump budget would eliminate these loans. However, for the last few years the loan program has not been active.

Under Trump, the Environmental Protection Agency has proposed eliminating any increase in fuel economy standards that new technologies have been designed to meet.

The Trump budget unlikely to pass the US Congress

A recent article notes: "Trump’s $4.7 trillion budget, which seeks to slash funding for foreign aid and the State Department and increase spending for the military and a border wall, is expected to be rejected by Congress."

Tax credit for EV purchase survives in recent tax bill

(December 16)The US tax credit of up to $7,500 on the purchase of an electric vehicle (EV) has managed to survive in the latest Trump tax plan. An earlier House bill would have ended the Obama-era credit as of the end of this year.

Earlier House bill would have ended EV tax credit

A bill passed by the House of Representatives in November would have ended the credit which ranges between $2,500 and $7,500 depending on the size of the EV and its battery capacity. A later bill passed in Senate in November kept the credit along with a number of other items that were cut in the version passed through the House of Representatives.

The credit would be phased out once a manufacturer sells 200,000 EV's as explained on the appended video.

Removal of the tax credit could crimp demand for EV's just as many auto makers are directing more investment towards EV's. EV's are a hard sell because of their high initial cost, limited charging infrastructure and range without being recharged. Gas prices are still relatively low as well.

Automakers and others successfully lobby to keep discount

The text of the reconciled bill has now been released and the tax credit was not ended.

A letter by two dozen mayors in support of keeping the credit along with pressure from auto manufacturers helped change the final bill to keep the discount. There was also pressure from the general public and environmentalists.

Automakers relieved at retention of discount

The large discount was a major factor in making the EV competitive in price with gas and diesel powered vehicles.

Many popular credits and deductions in other areas were zapped in the bill as the Trump administration tries to offset the slashes to corporate and other tax rates.

The automakers also want to encourage use of EV's to counteract the costs of increased emission regulations. Demand for EV's is already weak. The elimination of the subsidy would result in even less demand.

Tax bill remains a boon for corporations

The reconciled bill would permanently slash tax rates while offering only temporary cuts for individuals.

The corporate tax rate is to be cut from 35 percent to just 21 percent.

The Joint Committee on Taxation estimates that the bill will lower federal revenue by a whopping $1.45 trillion over a decade but this is within the limit of $1.5 trillion allowed a year under Senate rules.

The bill also takes away many existing benefits. It repeals the individual mandate in Obamacare. This represents a cut of $338 billion from the health care budget and is expected to leave 13 million uninsured by 2027.

The bill also does away with the minimum tax saving corporations billions.

The bill should be voted on in the House of Representatives on Tuesday and by the Senate later. It is hoped that it will be available for Trump to sign before Xmas.

Previously published in Digital Journal