On Tuesday night, the US Senate passed an amendment that would limit the plug-in vehicle federal tax credit. Currently, tax payers are eligible for a tax credit of up to $7,500 based on the size of the vehicle’s battery for the first 200,000 plug-in vehicles from a given automaker. But Republican Senator Deb Fischer of Nebraska introduced a non-binding amendment to the $3.5 trillion budget bill that would means-test this tax credit, restricting it to tax payers with incomes below $100,000.
Perhaps more significantly, Sen. Fischer’s amendment also restricts the tax credit to EVs that cost less than $40,000. Consequently, the only battery EVs that will still be eligible for the tax credit will be the Hyundai Ioniq Electric ($34,250), Hyundai Kona EV ($38,565), Mini Cooper SE ($30,750), and the Nissan Leaf S Plus ($39,220). Chevrolet’s Bolt EV and Bolt EUV are both below the price threshold, but in 2019 the automaker sold its 200,000th plug-in vehicle, at which point the tax credit began to phase out.
The amendment passed, 51-48. Senator Fischer took to Twitter to say that “everyday Americans are living paycheck to paycheck because of the sharp rise in costs due to #Bideninflation. We shouldn’t be subsidizing luxury vehicles for the rich using money from hard-working taxpayers.” (Inflation is mostly being driven by high prices for used cars, which in turn is a result of the chip shortage.)
Three Democratic Senators voted for the amendment: Joe Manchin of West Virginia, as well as Mark Kelly and Kyrsten Sinema of Arizona.
Republican Senator Marsha Blackburn of Tennessee voted against the amendment; Nissan and soon Volkswagen will manufacture EVs in that state, and General Motors and LG Chem are building a $2.3 billion battery factory in Tennessee as well.
Currently, plug-in vehicles represent 2 percent of new vehicle sales in the US; last week, President Joe Biden stated an ambition to increase this to 50 percent by 2030. Thankfully, Sen. Fischer’s amendment is non-binding and is unlikely to be greeted warmly by the House of Representatives. Meanwhile, European market share of plug-in vehicles has now risen above 10 percent thanks to effective policies that require OEMs to reduce their average fleet emissions or suffer massive fines.