House Republicans slam EV tax credit plan as 'perverse' and 'unfair'

Washington — House Republicans are fiercely opposing a proposal that would expand electric vehicle tax credits, arguing it favors the wealthy and asks taxpayers to subsidize products they don't want. 

Republicans and Democrats on the House Ways and Means Committee sparred Tuesday as Congress vets portions of Democrats' $3.5 trillion social spending bill, which they hope to pass by the end of the month. 

Embedded in the bill is a proposal by Rep. Dan Kildee, D-Flint Township, that would eliminate the automaker cap on EV credits and implement a $7,500 point-of-sale consumer rebate for electric vehicles. The bill would also pay out an additional $4,500 for vehicles assembled in a union facility and $500 for vehicles using a battery manufactured in the U.S.

Only EVs under certain price points would qualify, and the bargain would be limited to people making less than $400,000 a year, heads of households making less than $600,000 a year, or joint filers making less than $800,000 a year. Kildee said those figures adhere to the president's pledge not to raise taxes on people making less than $400,000 per year and exclude the wealthiest Americans.

Republicans argued Tuesday that these caps are far too high, calling Democrats hypocrites for shaping legislation that they say benefits wealthy Americans and select big businesses. 

“I just don’t understand why in the world we are subsidizing the wealthiest people in America to buy something they consider a trinket," said Rep. Mike Kelly, R-Pennsylvania, who is co-chair of the House Auto Caucus. 

Electric vehicles make up around 2.5% of total new car sales globally. Kelly argued that's a sign EVs aren't market-ready and shouldn't benefit from government help. 

"Don’t ask hard-working American taxpayers to fund these electric dreams," he said.

Rep. Drew Ferguson, R-Georgia, introduced an amendment that would reduce the cap to individuals making $75,000 a year and joint filers making $150,000. Rep. Jason Smith, R-Missouri, offered an amendment that would limit the tax credits to automakers with an annual income of less than $5 million. Both failed 25-17. 

“After years of hearing Democrats boldly claim that we need to eliminate loopholes in the tax code and the rich and corporations need to pay their fair share, you can imagine my surprise when the bill before us goes in the complete opposite direction," Smith said.

Rep. David Schweikert, R-Arizona, called the legislation a "perverse" boost to wealthy Americans amid concerns of a high national debt and inflation.

Democrats argued the incentives are necessary to reduce emissions and combat climate change. Transportation contributes the most greenhouse gas emissions of any sector, according to the Environmental Protection Agency. 

“This is an enormous existential risk; it’s the greatest responsibility we have," said Rep. Don Beyer, D-Virginia. "As long as the transportation sector is 29% (of the nation's greenhouse gas emissions), we need to do everything we can to make sure the industry is heading in the right direction.”

Kildee said the climate issue has to be dealt with "at scale," that it will help America dominate the future EV market. He noted that Republicans chose not to implement income or price caps on electric vehicle credits themselves when they overhauled the tax code in 2017. 

Currently, electric vehicle buyers can qualify for a $7,500 tax credit only for manufacturers that have sold fewer than 200,000 total EVs. That’s pushed General Motors and Tesla out of the running for the incentive. There’s also no maximum vehicle price or income cap.

“The future is electric. It’s going to happen," Kildee said. "The question is if we’re going to make these vehicles here in the United States” or cede the race to international competitors.

Ford Motor Co., General Motors Co. and Stellantis NV praised the legislation late last week, but their nonunion rivals Honda Motor Co., Tesla Inc. and Toyota Motor Corp. have called it unfair and discriminatory. Toyota wrote a letter to the committee Tuesday, urging lawmakers to reject the "blatantly biased proposal."

Automakers globally are investing heavily in transitioning fleets to electric vehicles rather than gas- and diesel-powered ones, but have asked lawmakers to subsidize research and development, factory retooling, charging stations, consumer rebates and more to help accelerate adoption. Analysts expect EV sales to outpace gas engine sales by the middle of the next decade.

The tax credit legislation is expected to be voted upon later this week for inclusion in Democrats' social spending bill, which they hope to pass later this month alongside a smaller bipartisan infrastructure package. The bipartisan package includes $7.5 billion for EV charging stations and $2.5 billion for electric buses. 

President Joe Biden has called for $174 billion for U.S. manufacturers to “win” the electric vehicle market, which is expected to grow rapidly in coming years. His original proposal included $100 billion in consumer incentives and $15 billion to build a nationwide network of EV charging stations.

rbeggin@detroitnews.com

Twitter: @rbeggin