The Senate appears on the verge of passing a massive tax-and-spending package that’s being underwritten by President Donald Trump. Beginning October 1, this new law will remove popular tax credits for electric vehicles (EVs). This legislation, approved on Tuesday, presents a major shift in federal support for EVs, potentially impacting consumer choices in the rapidly evolving automotive market.
The new law will phase out the current $7,500 buyer’s credit for buying or leasing a new EV. It will further remove the $4,000 credit for used EVs. Consumers need to get their EV before September 30 to receive these added benefits. The transportation sector is the single greatest domestic contributor to climate change, responsible for roughly 28 percent of all U.S. greenhouse gas emissions. According to the Environmental Protection Agency, this now makes it the biggest source of national emissions.
In May, the average priced new electric vehicle jumped to nearly $57,700. By comparison, a new car powered by gas averaged about $48,100. This gap is troubling since it increases our concern around affordability. This is why federal tax incentives are critical in helping EVs become more affordable for consumers. Researchers at the University of Michigan noted that these federal tax incentives are essential in bridging the cost gap between electric and gasoline vehicles.
The Inflation Reduction Act, signed by President Joe Biden into law, first extended tax breaks for EVs until at least 2032. If the current legislation continues unchanged, it will deprive consumers of increasing benefits. This will mainly affect people who purchase or lease electric vehicles after July 1, 2023.
See Rep. Mike Lawler for example, explaining why he prefers the Senate’s changes to the tax reconciliation bill. He further underscored the consequences to consumers and the environment that come as a direct result of eliminating these incentives.
Ingrid Malmgren, an expert in electric vehicles, emphasized the urgency of this situation, stating, “If you’re interested in driving an EV — either new, used or leased — now is the time to act.”
She reflected on the broader impact of the impending changes: “This is going to be the summer of the EV, because come the end of September those credits will be gone.” And consumers should have the ability to make informed decisions about the vehicle they’re buying. If they delay too long, they will miss out on valuable 21st century incentives.
The elimination of these tax credits could significantly affect consumer behavior in an already competitive market dominated by rising prices. Electric vehicles are becoming more desirable to eco-minded car buyers. In truth, this legislative change may… Read More » This innocuous-sounding legislative change would effectively moat their adoption.