The Biden administration wants to provide $100 billion in new consumer rebates for those who purchase electric vehicles, and President Biden himself will be touting electric vehicles while visiting Detroit today.
Right now, almost all electric and plug-in hybrid cars purchased new in or after 2010 are eligible for a federal income tax credit of up to $7,500, depending upon the capacity of the battery used to power the vehicle. However, the tax credit was designed to spur the initial sales of electric models and stopped for a particular manufacturer after they sold 200,000 electric vehicles. General Motors and Tesla have reached that threshold, and GM CEO Mary Barra is pushing to have the tax credit restored for GM cars and made permanent. She contends the expiration of the tax credit amounts to punishing manufacturers who were most successful in developing the market for these vehicles.
As the comedic genius Remy observed back around Christmas 2018, the generous tax credit means those purchasing extremely expensive electric vehicles were effectively provided $7,500 in taxpayer money against the cost of their car, while lower-income Americans purchasing gasoline vehicles didn’t get anything. Americans may want to encourage the purchase of electric vehicles… but do they think a four-figure tax credit for purchasing a luxury vehicle is the right approach?