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The $7,500 Electric Vehicle Tax Credit will Survive Tax Reform

After the bill’s passage in the U.S. House of Representatives, things look good for the Electric Vehicle Tax Credit as it heads to the Senate for a vote.

If you’ll remember back around 2009, as well as 2012-2014, gasoline prices had soared well above $3 per gallon following the collapse of the housing market and we saw more electric vehicle chatter than we had ever heard before.  Not only were Democrats pushing their agenda of replacing fuel-guzzling vehicles with clean/renewable energy and electric vehicles, but members of Congress on the other side of the aisle wanted it too!  However, now that the U.S economy, as well as most of the world’s economy, has recovered for the most part, replacing today’s cars with EV motors doesn’t seem to be all that big of a deal anymore.

Over the last few months, Republicans in the U.S. Congress have been working harder than they have in years (which still doesn’t appear to be all that hard) to pass the new tax reform bill since they currently control both the House of Representatives and the Senate.  After their horrible failure to repeal and replace Obamacare, it is extremely important for them to show that they can get at least one thing done in their terms.  President Trump is also applying some serious pressure to establishment Republicans to push his agenda through since he promised his voters that he would.

Of course, there are tons of different factors that come into play with the changes in tax credits and exemptions in all of these bills.  Among those factors is the Electric-vehicle tax credit of 2009.  The initial proposed tax plan would eliminate a tax credit that came into play giving a whopping $7,500 credit to those that purchase electric-motor vehicles.  This tax credit applied to all brands of EVs, as well as models that are produced overseas.  The only snag to the credit is that it is capped out at 200,000 vehicles per manufacturer per year.  Granted, this isn’t much of a snag as of right now with EV sales as low as they currently are.

However, in early December, during Congress’ negotiations, an Arizona Republican Senator, Jeff Flake, proposed an amendment that would cancel the EV tax credit on December 31, 2017.  When considering the pros and cons of converting gasoline-motor vehicles to electric, the pros definitely outweigh the cons.  Some speculate that there would be an overall shrinkage of GPD if all vehicles switched, however, we all know that we would spend the money elsewhere.  About the only people that would be hurt by this environmentally-friendly change would be the oil companies.  However, the majority of our fuel is currently being imported due to other countries driving the price down anyways, so it’s a change that (as of right now) will stay its current trajectory.

The stay of the EV tax credit was also heavily favored by nearly all of the large automakers as well as environmental agencies, groups, companies, and renewable-energy companies.  Not only will the tax credit benefit those that buy the vehicles, it will also encourage research and development of new electric-motor technologies, stimulate vehicles sales overall in the near-future, and drastically lower the carbon footprint of drivers all around the world.

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Paul Sawyer
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