U.S. Democrats Propose Dramatic Expansion of Electric Vehicle Tax Credits for Big Three

WASHINGTON, Sept. 10 (Reuters) – U.S. Democratic lawmakers on Friday proposed an extension of electric vehicle tax credits that includes significantly higher subsidies for zero-emission models made by unions and assembled in the United States.

The proposal, a key part of President Joe Biden’s goal of ensuring electric vehicles account for at least 50% of vehicle sales in the United States by 2030 and boosting American union jobs, will give the three Detroit’s major automakers have a significant competitive advantage and has drawn criticism from foreign automakers like Honda. Motor Co (7267.T) and Toyota Motor Corp (7203.T).

The tax credit of up to $ 12,500 per vehicle for zero-emission models made in the United States compares to an incentive of $ 7,500 for most other electric cars – an amount that has not changed .

The bill, however, phased out auto manufacturer tax credits after reaching 200,000 electric vehicles sold, which would again make General Motors Co (GM.N) and Tesla Inc (TSLA.O) eligible. It would also create a new, smaller credit for used electric vehicles of up to $ 2,500.

House Democrats had not previously disclosed by how much they could increase EV credits. The dramatic hike and other revisions could lower the price of some electric vehicles like GM’s Chevrolet Bolt by up to a third and make battery-powered vehicles more competitive or, in some cases, cheaper than similar gasoline models.

“We want to encourage that. It puts American manufacturers first, this is where we want them, and it cuts emissions faster than any other policy we could put in place,” Representative Dan Kildee told Reuters. , a Democrat from Michigan.

He said the new electric vehicle tax credit would cost between $ 33 billion and $ 34 billion over a decade.

“A decade from now, we want to see American workers earning good wages by building American electric vehicles,” he added.

Kildee said Biden, who made the proposal a cornerstone of his climate policy, “had been very insistent” that he wanted a significant tax credit for electric vehicles. “He wants us to bend over. Let’s think big and do it,” Kildee said, recounting a recent conversation with Biden.

OPPOSITION BILL

GM, Ford Motor Co (FN) and Stellantis NV (STLA.MI), the parent company of Chrysler, assemble their vehicles made in the United States at factories represented by the United Auto Workers union.

In contrast, foreign automakers operating in the United States as well as Tesla do not have unions representing assembly workers, and many of them have fought the UAW’s efforts to organize American factories.

As discussions over the electric vehicle tax proposal gained momentum, Honda said in a statement last month that its workers “deserve fair treatment from Congress and should not be penalized for their choice. workplace ”.

The House Ways and Means Committee will vote on Tuesday on the proposal that is part of a large tax measure in a $ 3.5 trillion spending bill.

The bill will face opposition in the Senate, which is equally divided 50-50 between Republicans and Democrats. Republicans have harshly criticized much of the spending bill, and Democrats must retain the Democratic Senate’s 50 votes to gain approval.

But a Senate panel also approved legislation in May to increase electric vehicle credits up to $ 12,500 for U.S. vehicles made by union workers – despite all Republicans in opposition.

The proposed EV credits would last for 10 years and consumers would be allowed to deduct the credit value from the sale price at the time of purchase.

In 2027, the $ 7,500 credit would only apply to vehicles manufactured in the United States. There are also lower credits for electric vehicles with smaller batteries.

The bill states that individual taxpayers must have an adjusted gross income of no more than $ 400,000 to qualify for the new electric vehicle tax credit. This would limit the EV credit to cars priced as low as $ 55,000, while trucks could cost up to $ 74,000.

But these limits can be pushed back.

Last month, the Senate, in a non-binding amendment, narrowly voted in favor of banning taxpayers from claiming electric vehicle tax credits if they earn more than $ 100,000 per year or if the vehicles cost over $ 40,000.

Reporting by David Shepardson; Editing by Edwina Gibbs

Our Standards: The Thomson Reuters Trust Principles.