American tax credits for electric vehicles are, to put it kindly, hot garbage. They don’t apply at the point of sale, they phase out once an automaker moves too many units, and they rely on the buyer having a pretty hefty tax bill to apply the credit to.
House Democrats have tried to address some of these faults with a new, improved EV tax incentive. The proposed bill gives buyers a bigger discount, incentivizes the use of union labor to build cars, and gets rid of that 200,000 unit cutoff. What’s not to like?
According to conservative Democrats in the Senate, the bill would just help too darn many people get into EVs. So they want to lower the income cap that determines who’s eligible for the credit. That’s called means testing, and it’s being suggested as a way to reduce the cost of the credit by reducing the number of people who are eligible for it.
The version of the EV credit proposed in the House caps discounts at an annual income of $400,000 ($800,000 for buyers who jointly file their taxes with a significant other). Moderate Senators have discussed dropping that cap down to just $100,000 per year.
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On the surface, one can see how this would make sense. Reducing the cost of things is generally good, handing money to Scrooge McDuck is bad. The broad strokes, in a vacuum, seem to work out.
Unfortunately, we don’t live in a vacuum. We live on a rapidly boiling planet, one shared between Ebeneezers and Tiny Tims. Getting more people out of combustion engines and into electric vehicles is good, regardless of what percent of their income goes towards their next car purchase.
House Democrats have already rejected one attempt to means-test the EV tax credit. When the call for restriction is coming from inside the party, however, it’s unclear if progressives can hold their ground.
