Democrats unveil new electric vehicle tax credit proposal with a boost for unions

Washington –Democrats in Washington want to include a major new incentive to buy electric vehicles in their $ 3.5 trillion social spending bill, according to a new plan revealed by the House Ways and Means Committee on Friday.

For five years, the law would implement $ 7,500 in point-of-sale consumer rebates for electric vehicles and pay an additional $ 4,500 for vehicles assembled at a union facility. Another $ 500 would be given for vehicles using a US-made battery

Over the next five years, the base credit of $ 7,500 would only apply to electric vehicles made in the United States, but the other two incentives would remain the same.

“We want to make sure that the people who earn good wages, support their families and contribute to those wages and benefits in their community are the primary beneficiaries,” said Representative Dan Kildee, of the Township of D-Flint, who serves on the Ways and Means Committee and pushed the bill through the House.

The first five years should spur the adoption of electric vehicles and domestic production of batteries, while the second half should be limited to domestic producers, he said.

“We think this gives everyone plenty of time to understand that when it comes to the US fiscal dollar, we’re not going to do it in such a disruptive way for the market,” Kildee said.

But “five years from now, we’re making it clear that these dollars will go to people who earn good wages in American factories, and that’s where the US tax dollar should go. “

The legislation also seeks to prohibit wealthier Americans and luxury vehicle manufacturers from benefiting from the program by setting caps on income and selling prices to qualify.

Sedans under $ 55,000, vans under $ 54,000, SUVs under $ 69,000 and pickup trucks under $ 74,000 would be eligible for the credits. People with adjusted gross income up to $ 400,000, heads of households earning up to $ 600,000 and joint filers earning up to $ 800,000 could use the program.

The income caps are significantly higher than those proposed by Senate Republicans, who passed a non-binding amendment in August to prevent buyers from claiming credits if they earn more than $ 100,000 a year or if the vehicle costs over $ 40,000.

The higher income cap will allow 98% of taxpayers to use the credit and ensure that those who are not the richest Americans are exempt from the legislation, Kildee said.

“The vast majority of people who benefit from it will earn significantly less than ‘$ 400,000,’ Kildee said. “But we’re trying to stay consistent with the president’s commitment that people earning less than $ 400,000 will not see a tax increase. Taking that credit away from them, in a sense, would be like a tax hike.

Republicans widely oppose push to expand incentives, arguing the policy favors wealthy car buyers and tips the market balance in favor of technology with weak supply chains consumers demand. not yet.

GOP members should not vote for the $ 3.5 trillion social spending plan Democrats plan to push through party lines using a “reconciliation” budget process, which allows them to cross the threshold. 60 votes needed to pass most laws in the Senate.

The House Ways and Means Committee will vote on whether to include consumer credit legislation in the reconciliation bill next week.

Democrats will need to stay in sync to pass the legislation without the help of any Republican. They have a majority of 220-212 in the House and a very slim 50-50 majority in the Senate, with Vice President Kamala Harris casting the deciding vote.

House Democrats have worked with Senate and White House leaders to agree on an incentive structure that “gets us across the finish line,” Kildee said. “I think it will be included regardless of the extent of the larger legislation.”

President Joe Biden has asked US manufacturers $ 174 billion to “win” the electric vehicle market, which is expected to grow rapidly in the years to come. Its original proposal called for $ 100 billion in incentives for consumers and $ 15 billion to build a nationwide network of electric vehicle charging stations.

A $ 1,000 billion two-party infrastructure bill includes $ 7.5 billion for electric vehicle charging stations and $ 2.5 billion for electric buses.

The tax credit legislation released on Friday also differs from a version proposed by Senator Debbie Stabenow, D-Lansing, which was passed by a Senate panel in May. At the time, the provision was estimated at $ 30 billion over a 10-year period.

The original version of Stabenow would have removed the cap for automakers, added $ 2,500 for cars built by union members and an additional $ 2,500 for vehicles assembled in the United States.

Stabenow, who spearheaded the effort in the Senate, said she was happy with the “robust” consumer discount that she, Kildee and others have negotiated over the past few months.

“The automakers were on speed dial and the UAW. We have an approach that is not only good for encouraging people to choose an electric vehicle, but we also have very specific Michigan incentives and bonuses, ”she said.

Stabenow called the $ 4,500 credit for union-made vehicles a “Michigan bonus” which rewards automakers “who offer high labor standards and high wages.”

Only vehicles powered by high capacity batteries would qualify for the full base credit of $ 7,500 to incent automakers to build electric vehicles that can travel farther on a single charge. According to industry analysts, “range anxiety” – the fear that drivers will not be able to make long journeys in the car with their electric vehicle – is one of the biggest barriers to driving. consumers to the adoption of electric vehicles.

Currently, buyers of electric vehicles can claim a refundable tax credit of $ 7,500 only for manufacturers who have sold less than 200,000 electric vehicles in total. This pushed General Motors Co. and Tesla Inc. out of the incentive race. There is also no maximum vehicle price or income limit.

The layout of the ways and means would raise the ceiling of 200,000 vehicles, according to the office of Kildee.

GM, Ford and Stellantis NV announced alongside Biden in August that they would aim to sell 40-50% electric vehicles by 2030, but said significant federal help in the form of consumer incentives. and other funding would be needed to achieve this.

The Alliance for Automotive Innovation, an advocacy organization representing the major automakers that sell vehicles in the United States, also said it supports increasing incentives for consumers to buy electric vehicles.

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