American Taxpayers Will ‘Fund Lucrative Tax Credits’ Worth $136 Billion For Biden’s Electric Car Agenda
American Taxpayers Will ‘Fund Lucrative Tax Credits’ Worth $136 Billion For Biden’s Electric Car Agenda

By Naveen Athrappully

The Biden administration’s tax credits for electric vehicles (EV) could end up costing taxpayers four times more than earlier estimates, with multiple manufacturers set to collect billions in such credits over upcoming years.

Among the many tax rebates in the Inflation Reduction Act (IRA) passed last year, one is specifically aimed at electric battery manufacturing. For each kilowatt-hour of U.S.-manufactured cell, a company will get tax credits worth $35. This is expected to cut down battery production costs in the country by a third.

An estimate made by the Congressional Budget Office (CBO) in August last year foresaw tax revenues lost from these tax credits amounting to $30.6 billion over a period of 10 years, with the figure including credits for solar and wind manufacturing as well.

A new estimate by London-based Benchmark Mineral Intelligence, a specialist information provider for lithium-ion batteries in the EV supply chain, puts the total cost of battery rebates at $136 billion over 10 years, according to Axios. This would be four times the CBO’s estimated revenue loss for the government.

“President Biden has a goal to get 50 percent of all new vehicles sold in the United States to be electric by 2030. To reach that goal, the administration wants to invest in EV infrastructure and does not mind making taxpayers, who are already suffering from high inflation, fund lucrative tax credits,” said a Feb. 6 post by the Institute for Energy Research.

“Through these subsidies, the government is picking winners and losers, and history has shown that the government usually fails when it interferes with the market.”

EV Manufacturer Benefits, tax Credits 

EV manufacturers are expecting big money from Biden’s tax credits program. Tesla is expecting $1 billion in battery tax credits for 2023. The company’s Nevada plant can grow to manufacture up to 500 gigawatt-hours of battery cells, which would come to $17.5 billion in tax credits.

GM is expecting its credits to net $300 million this year. Ford estimates over $7 billion in credits during the three-year period between 2023 and 2026, after which the company expects the credits to grow.

The EV tax credits of up to $7,500 will be offered to U.S. citizens who buy certain electric vehicles or plug-in hybrids.

According to regulations, at least 40 percent of the critical minerals used in the battery must be (a) from North America, or (b) from a country that has a free trade agreement (FTA) with the United States, or (c) recycled in North America. This number is set to go up to 80 percent in 2027. The critical minerals cannot come from a “foreign entity of concern.”

In addition, roughly 50 percent of the battery parts must be assembled in the United States or with a country that has an FTA with America. This number will jump to 100 percent in 2029.

IRS Rule Change, Income Qualification, Expensive And Impractical Vehicles

On Feb. 3, the IRS and Department of Treasury changed the vehicle classification standard to see more vehicles qualify for EV tax credits, allowing vans, pickup trucks, and SUVs to get tax credits as well.

To qualify for EV credits, the annual income of an individual must be below $150,000, and that of married couples buying a new vehicle need to be less than $300,000. For used vehicles, annual income must be below $75,000 for singles, and less than $150,000 for married couples.

But despite the Biden administration’s push to promote EVs, they still remain too expensive for many people. One survey found that 85 percent of drivers in the United States could not afford an electric vehicle.

A survey published by Rasmussen Reports in August found that only 28 percent of American drivers saw electric cars as “practical for most drivers,” with 54 percent saying that these vehicles aren’t practical.

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