On Wednesday, the Senate Finance Committee advanced the Clean Energy for America Act making a few tweaks from earlier proposals. Changes include raising the federal EV tax rebate ceiling to $12,500 and opening the door for automakers who already exhausted their production quotas.
It’s good news for General Motors, which recently begged the government for just such a handout. But any manufacturer participating in the sale of electric vehicles will find themselves similarly blessed by the updated rules — assuming they make it through the halls of Capitol Hill with the necessary support.
Let’s take a peek behind the curtain to see what the updated proposal entails.
While the $7,500 tax credit persists, the bill now adds special exemptions depending on how the vehicle is manufactured For example, the government will tack on another $2,500 if final assembly takes place inside the United States and another $2,500 if the factory in question happens to be represented by a union. While the latter inclusion seems concerningly political, there doesn’t appear to be any language stipulating whether not it matters if unionized plants have to be located in the country for the vehicle to be eligible.
It’s also probably one of the biggest reasons why the committee advanced the legislation on a tie split evenly (14-14) along party allegiances. But the rules say the bill only gets the kibosh if it loses the vote, so the deadlock still means it can be sent all the way to the Senate. But some of the particulars might make its pathway there incredibly difficult.
Perhaps the most fiscally irresponsible aspect of the proposal involves ending any caps on vehicle production. Early incarnations of the EV tax credit were intended only to get the ball rolling on alternative energy vehicles, so they would gain public acceptance. But the Clean Energy for America Act will continue issuing credits until electric vehicles become over half of a company’s annual sales. Even then, there will be a phase-out period where rebates would be scaled back over two years — similar to how things work under the current rules.
This is an insane amount of money for any government to effectively hand over to automotive manufacturers with no definitive end date. We have no real way of knowing when EVs will supplant the internal combustion engine as the dominant powertrain. These subsidies could last for decades, extending well beyond the point where electrically driven cars reach financial parity with ICEs. They also won’t be linked to the Biden infrastructure plan, which is striving to create $100 billion in additional rebates for electric cars.
Let’s not forget all this money is supposed to be coming from America’s tax base and there’s literally no way to even begin estimating what the total cost will be.
The Clean Energy for America Act basically throws any notion of there being a free auto market out the window. It incentives the building and purchase of EVs to such a degree that there would be little reason to continue pursuing gasoline or diesel development. Even they were suddenly proven to be better for the environment or consumers than plug-ins, the payout for running with EVs would still be far too big to ignore. I believe the correct term for this is a “planned economy,” as it technically shapes/restrains existing consumer demand in favor of greater capital investments for economic development in a manner that suits government goals.
In fact, the only aspect of the proposal that seems to exercise any financial restraint is the MSRP eligibility limit of $80,000. This is designed to prohibit wealthy individuals from taking advantage of the federal tax credits. However, most high-end electrics currently on the market already come in below the cutoff — including the Porsche Taycan and Tesla Model S.