Attacking Electric Vehicles

In what seems like a strange move in a week where for the second time in just over a month a massive hurricane is wreaking havoc to the US, and the U.N. released a report on climate change indicating dire consequences if carbon emissions are not drastically reduced over the next decade, John Barrosso (R-Wyoming), the chairman of the Senate Environment and Public Works Committee, introduced a bill attacking the fledgling electric vehicle market in not one, but two ways.

Switching to electric vehicles is one of the main ways the US (and other countries) can reduce their emissions. Other countries are announcing aggressive timelines for when they will ban sales of new gasoline and diesel powered vehicles. Just this week, Israel announced they will ban sales of new gasoline and diesel vehicles by 2030

Tax Incentive

The first attack would be to remove the $7,500 federal tax incentive for purchasers of new electric vehicles. His claim is that this benefit is mostly being claimed by wealthier car buyers. That logic is flawed since many of the EVs on the road today are the more affordable ones from companies like Nissan, Chevrolet and Fiat. Furthermore, while Tesla, Jaguar, Mercedes and Audi generate a lot of headlines, others like Hyundai are bringing their more affordable EVs to the market this year.

That $7,500 is much more valuable to somebody looking to buy a $30,000 Nissan LEAF (a 25% discount) than it is to somebody buying a $140,000 Tesla (~5% discount).

Removing it completely makes no sense. If the goal is to limit the number of luxury car buying wealthy people taking advantage of it (which is a position that is hard for tax cutting Republicans to claim, especially after passing a massive tax cutting bill), simply put an upper limit on the price of the vehicles it applies to, as some other countries have done.

Federal Highway Usage Fees

The second part of the bill attempts to replace the tax revenue lost from alternative fuel vehicles not paying the federal fuel taxes that are levied on gasoline and diesel. Rather than paying the tax when buying fuel, this new tax would be collected via the annual tax return.

At some point, once a significant number of vehicles on the road are electric (or “alternative” fueled at least), it does make sense to replace the revenue lost through “gas taxes.” While the number of EVs on the road is so small, and it is in (almost) everybody’s interest to increase that number, and imposing additional taxes on EVs seems counter-productive. Given the dire need to reduce carbon emissions, it would make more sense to replace the lost tax revenue by increasing the taxes on gasoline and diesel, making it even more appealing for people to switch to EVs as soon as possible.

By his logic, making ICE vehicles more efficient should also incur a tax penalty – all those hybrids and small, efficient engines should also be charged since they also result in “lost” tax revenue when compared to larger “gas guzzling” trucks and cars.

The Real Reason?

Seems odd that the chairman of a committee responsible for all matters relating to air pollution, environmental effects of toxic substances (other than pesticides) and environmental policy should be trying to reduce sales of cars that will help reduce air pollution and other environmental effects of burning fossil fuels.

There are also obviously better ways of replacing lost tax revenues and fixing the incentives, so what could be motivating Barrosso?

John Barrosso, Campaign Contributions by Industry

The answer may well lie in his campaign finances (from OpenSecrets). Almost half a million dollars worth from the oil and gas industry (more than $660K if you include leadership PAC contributions too).

The one industry that has the most to gain from attacking the fledgling EV market is the oil industry. While more EVs on the road does reduce the revenue from gasoline and diesel taxes, it has a bigger impact on oil industry profits. Is it a coincidence that the second largest contribution to his campaign came from the oil industry (the largest if leadership PAC contributions are included)?

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