Auto industry representatives complain that the proposed $7,500 tax credits for electric vehicle buyers come with so many strings attached that few cars will qualify. Buyers can’t have very high incomes, vehicles can’t cost too much, and their cars and batteries must meet American-made requirements that many automakers can’t easily meet. “It’s going to be much more difficult for cars to qualify and for consumers to qualify for a federal tax credit to buy an EV,” said John Bozzella, president of the Alliance for Automotive Innovation, which represents major U.S. and foreign car manufacturers. Some companies will benefit more than others from the sweeping legislation, known as the Deflation Act, which is expected to pass the House on Friday, after the Senate approved it on Sunday. The new credits favor companies such as Tesla and General Motors, which have sold electric cars for years and have reorganized their supply chains to produce vehicles in the United States. A joint venture between GM and LG Energy Solutions will soon open a battery factory in Ohio, part of a wave of electric vehicle investment by automakers and suppliers. Vehicles sold by Tesla and GM will regain eligibility for incentives that the automakers had lost because they had sold more than their 200,000 electric car limit under current law. The legislation removes this limit. The legislation could be tougher on companies like Toyota and Stellantis, which owns Chrysler, Jeep and Ram, because they haven’t started building or selling large numbers of battery-powered vehicles in the United States. The legislation effectively penalizes newer electric car companies like Lucid and Rivian, whose vehicles may be too expensive to qualify for the credits. The incentives apply to sedans costing no more than $55,000 and pickups, trucks or sport utility vehicles costing up to $80,000. Lucid’s cheapest sedan starts at more than $80,000. Rivian electric pickups start at $72,500, but can easily top $80,000 with options. The company said it was investigating whether customers could lock in incentives by making a binding purchase agreement before the new law takes effect. Even automakers that might lose access to tax credits could benefit from the legislation in other ways. The bill contains billions of dollars to help automakers build factories and establish local supply chains. Dealers will benefit from a provision that grants $4,000 in credits on used electric vehicles, with minimum strings attached.
What’s in the Climate, Health and Taxation Bill?
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What’s in the Climate, Health and Taxation Bill?
Automobile industry. Currently, taxpayers can get up to $7,500 in tax credits for the purchase of an electric vehicle, but there is a limit on how many cars from each manufacturer are eligible. The new bill would eliminate that cap and extend the tax credit through 2032. Used cars would qualify for a credit of up to $4,000.
What’s in the Climate, Health and Taxation Bill?
Energy industry. The bill would provide billions of dollars in rebates for Americans who purchase energy-efficient and electrical appliances. Companies will receive tax credits for building new emission-free electricity sources. $60 billion is available to encourage clean energy production and penalize methane emissions that exceed federal limits starting in 2024.
What’s in the Climate, Health and Taxation Bill?
Health Care. For the first time, Medicare could negotiate with pharmacists on the price of some prescription drugs. The bill would also extend subsidies available under the Affordable Care Act, which were set to expire at the end of the year, for an additional three years.
What’s in the Climate, Health and Taxation Bill?
Tax code. The bill would introduce a new minimum corporate tax of 15% on profits that companies report to shareholders, which would apply to companies that report more than $1 billion in annual revenue, but can use credits, deductions and other tax treatments to reduce the effective tax rates. The legislation would bolster the IRS with an investment of about $80 billion.
What’s in the Climate, Health and Taxation Bill?
Low-income communities. The bill would invest more than $60 billion to support low-income communities and communities of color that are disproportionately burdened by climate change. This includes grants for zero-emission technology, as well as money to mitigate the negative impacts of highways and other transportation facilities.
What’s in the Climate, Health and Taxation Bill?
Fossil fuel industry. The bill would require the federal government to auction off more public land for oil drilling and extend tax credits for coal and gas-fired plants based on carbon capture technology. Those provisions are among those added to win the support of Sen. Joe Manchin III, D-West Virginia.
What’s in the Climate, Health and Taxation Bill?
West Virginia. The bill would also bring big benefits to Mr. Manchin’s state, the nation’s second-largest coal producer, by making permanent a federal trust fund to support miners with black lung disease and offering new incentives to build wind and solar farms in coal-mining areas. or recently closed coal plants. “We need to look at this law as a whole,” said Margo Oge, former director of the Office of Transportation and Air Quality at the Environmental Protection Agency. “It’s perfect; No. It will create jobs and be good for the climate.” And once automakers make changes to their supply chains required by the bill, they will be able to offer customers generous incentives for the rest of the decade and then some. It may take a few years, but eventually the legislation will help make electric cars cheaper than gasoline and diesel vehicles, analysts say. “The consumer tax credit was certainly not written the way I would have written it,” Sen. Debbie Stabenow, D-Michigan, told reporters this week, referring to the $7,500 incentive. But to pass the bill, he said, he agreed to the wishes of Sen. Joe Manchin III, D-West Virginia. Mr. Manchin said it makes no sense to subsidize electric vehicles because demand is so high that there are long waiting lists for many models. However, Ms Stabenow added: “There are a lot of great things in here for us.” A feature of the bill that has drawn the most complaints would require by 2024 that at least 50 percent of the components in an electric car battery come from the United States, Canada or Mexico. The percentage rises to 100 percent in 2028. And the share of minerals in batteries that must come from the United States or a trading ally will rise to 80 percent in 2026. Some industry executives said it would take five years for auto companies to revamp their supply chains enough for their products to qualify for tax credits. Others say it’s overkill. “I would be shocked if that were the case,” said Joe Britton, executive director of the Zero Emissions Transportation Association, whose members include Tesla and battery and raw material suppliers. While the agency would prefer fewer restrictions, Mr. Britton said, “we still see this as a huge accelerator of transportation electrification, especially compared to where we were a month ago.” Some of the limitations on tax credit eligibility may not be as strict as they appear and are open to interpretation. For example, Ms. Stabenow said, it appeared that the $7,500 credit would apply to all manufacturers until next year before the content restrictions went into effect. The legislation leaves it up to regulators to decide which components are classified as Chinese. It is unclear, for example, whether Chinese companies such as CATL, the world’s largest battery maker, would be frozen out of the market if they produced batteries in the United States. CATL is reportedly exploring building a plant in the South to supply Ford Motor and BMW. Most environmentalists have generally applauded the law for reducing inflation, despite concessions made to the fossil fuel industry at Mr. Manchin’s insistence, and even though the bill does little for public transportation or two-wheeled vehicles such as scooters and electric bikes. The Sierra Club, the environmental nonprofit, has long pushed to reward buyers of used electric vehicles and was glad to see this in the bill, said Katherine J García, director of the organization’s Clean Transportation for All campaign. He also said it made sense not to provide incentives to high-income earners who don’t need the help. To qualify for the new electric vehicle credit, buyers cannot have taxable income of more than $150,000 if they are single filers or $300,000 for joint filers. “It increases the dollars for the people who need the rebate the most,” Ms. Garcia said. Tesla, which makes expensive cars popular with wealthy professionals, has managed to outperform all of its rivals in the electric car industry despite losing access to the current federal electric car tax credit several years ago. This suggests that luxury car buyers will continue to buy electric cars whether they get a tax break or not. Ultimately, income caps will encourage automakers to offer cheaper vehicles, said Mark Wakefield, co-head of automotive and industry at AlixPartners, a consulting firm. “You’re going to see a laser focus on getting below the $80,000 and $55,000 ceilings.” Price caps and manufacturing rules in America will also encourage automakers to develop cheaper batteries that require fewer imported raw materials. Tesla and other automakers already sell cars with iron- and phosphate-based batteries,…
