A billion incentives: U.S. tax credits for EVs cross the $1 billion market
As the U.S. Treasury Department announces a milestone in assistance for Americans buying Electric Vehicles, it remains pennies on the dollar compared to subsidies for oil companies.
The U.S. Department of Treasury announced yesterday a milestone for the Biden Administration’s effort to transition the country away from gas-powered cars: It had provided more than $1 billion in tax rebates to Americans buying EVs.
The department said the rebates have gone to the buyers of 150,000 new EVs since the passage of the Inflation Reduction Act.
In its statement, the Treasury said:
“Since the passage of President Biden’s Inflation Reduction Act, the U.S. has experienced significant growth in the clean vehicle industry. In 2023, the U.S. saw around 1.5 million passenger clean vehicle (battery electric, fuel cell, plug-in hybrids) sales – the highest annual total ever and a 50 percent year-over-year increase from 2022. Today’s announcement demonstrates the significant related cost savings Americans are benefitting from as a result.”
An EV can save a car buyer $1,750 per year on gas and maintenance, or about $21,000 over a 15-year vehicle, life the agency said.
To qualify for a federal tax rebate, an EV must have been almost entirely manufactured in the U.S. with domestic parts and materials. EV buyers can receive as much as $7,500 in credits for qualifying vehicles.
In spite of the milestone, which came largely from tax credits issued through the end of 2023, the Biden Administration was obligated to drastically scale back the number of tax credit-eligible EVs at the beginning of 2024 when domestic production requirements became more stringent. Fewer electric cars qualified for the rebates under the tougher requirements.
Tax credits are nothing new in the U.S. to spur commercial activity in various sectors. The U.S. oil lobby itself has benefitted from direct and indirect federal subsidies of about $20 billion annually. On a global basis, governments provided $7 trillion—" trillion,” with a “t,”—in subsidies to the fossil fuel industry in 2022, according to the International Monetary Fund.
Congress almost deadlocked in 2022 in its effort to provide EV tax credits, largely due to obstruction by Senate Republicans and then-Democratic U.S. Sen. Joe Manchin - who has a long reputation for lobbying for the oil industry and against climate change response. Manchin came on board with the EV tax credit, idea, though when President Biden agreed to a plan that sharply reduced the credits and included stringent requirements on which cars are eligible.
Manchin has since left the Democratic party and has said he will retire from Congress at year’s end.
Unless I'm mistaken, most federal "subsidies" for the oil and gas industries come in the form of depreciation write-offs for aging equipment, a benefit available to all companies. If true, I think it's disingenuous to compare that to rebates paid directly to consumers for purchasing EVs. And while I'd rather see the Fed to incentivize behavior it wants to encourage than ban the purchase of disfavored vehicle types outright, I'd much rather see a more laissez-faire approach. The market should be allowed to pick the winners and losers, not the government.