Eliminating “green” distortions to American vehicle and energy markets
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Estimated Revenue:
$390 billion
According to the Penn-Wharton Budget Model.
Summary
The Inflation Reduction Act (IRA) authorized three tax credits that individuals and businesses can claim when purchasing what it classifies as “clean” vehicles, including electric vehicles (EVs) and plug-in hybrids. Individuals who buy a new clean vehicle can receive a credit of $7,500, businesses that buy a new clean vehicle can receive a credit of up to $40,000 (also exploited by individuals through the so-called “leasing loophole”), and individuals who buy a previously owned clean vehicle can receive a $4,000 credit.
The Case for Repealing the EV Tax Credits
These tax credits are intended to promote a green energy transition, but in reality they put the battery-powered cart before the industrial horse. Spending hundreds of billions of dollars to subsidize the purchase of electric vehicles before domestic EV and battery supply chains, consumer demand, and power grid infrastructure are well established is short-sighted, wasteful, and undermines America’s economic interests. In many cases, these credits are directly deepening U.S. dependence on Chinese producers.
Congress should reform the tax code to incentivize investment in the real economy, but it should not favor EVs over other kinds of automobiles, especially when this places American firms and workers at a disadvantage. The United States lacks sufficient consumer demand and charging infrastructure to make a wholesale shift to EVs practical. Meanwhile, subsidizing EV production props up global supply chains heavily reliant on China and other foreign suppliers, effectively funneling taxpayer dollars overseas. Repealing these credits ensures fairness for our domestic auto industry and focuses on building industrial strength without strengthening foreign nations on the taxpayer’s dime.
Congress should repeal the IRA’s EV credits. Sen. John Barrasso (R-WY) and Rep. Jodey Arrington (R-TX) have introduced the Eliminate Lavish Incentives To Electric (ELITE) Vehicles Act, which would repeal all three tax credits authorized in the IRA. President Trump has called for their repeal as well.
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