Understanding the GOP Tax Plan: Electric Car Credit

By: Kevin Tang

In the face of climate change, electric vehicles pose as a practical solution that could help cut down global emissions. Switching over to electric vehicles would not only cut transportation emissions by 30% but also would reduce the consumption of oil by 1.5 million barrels.

    The International Energy Agency reported a record number of 750,000 electric vehicles sold worldwide in 2016; however, the growth in these sales is slowly dwindling. The only places where growth is increasing is in countries with tax incentives like Norway. Government support is key to foster this emerging market.
But, on November 2nd, the GOP unveiled a tax plan that would cut taxes across the United States, including a crucial tax incentive for the nascent electric vehicle market. If passed, it would eliminate Section 30D of the Internal Revenue Code which provides a tax break up to $7,500 when you purchase either a hybrid or an electric car.

    The tax credit provides $2,500 for a plug-in vehicle with at least a 5kWh battery capacity. Another $417 is given for every additional kWh. Since January of 2010, the incentive only applies to the first 200,000 buyers for each electric vehicle manufacturer, but so far, no company has reached the mark.

    Targeting low and middle income consumers, the credit is primarily used to subsidize leases on the cars, allowing consumers to pay for them. For instance, the Tesla Model 3 is currently listed at $35,000 but a rebate of up to $7,500 makes it much more affordable and attractive to a wider market.

    This incentive has been empirically proven to increase sales of electric vehicles and when taken away, there is a noticeable decline in purchases.

    States with high tax incentives like Hawaii, California, Georgia, and Washington have two to four times the concentration of plug-in cars than the national average. Looking internationally, Norway has the biggest market for these vehicles, now reaching 37% market share. In December, it had reached 100,000 all-electric cars despite its relatively small market. This expansive and emerging market has owed to Norway's incentives of free parking, free charging, exemptions from tolls, etc.

    Although Georgia was one of the domestic leaders in the electric vehicle market, it sharply plummeted after conservative state legislators removed the credit in 2015, instead opting for a $200 registration fee instead.

    "We should be around 40,000 vehicles now, " lamented Jeff Cohen, founder of the Atlanta Electric Vehicle Development Coalition. "We're not growing.” Although Georgia sold 1,426 electric vehicles in July 2015, it only sold 242 in August. This 83% drop has yet to rebound.

Public Service Commissioner Tim Echols, a staunch supporter of the incentive added on that “The tax credit was key to our growing this market.”
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While the GOP tax plan still needs to be passed by the Senate, consumers and electric vehicle companies must petition to protect the electric vehicle industry.