Republicans are eager to slash electric vehicle tax credits even as they struggle to coalesce around a strategy for a major tax and spending bill.
The EV credit tops the list of green subsidies enacted via the 2022 Inflation Reduction Act, signed by former President Joe Biden, that Republicans are looking to ax through reconciliation, a budget process that allows bills to bypass the filibuster and pass with only a simple majority in the Senate.
GOP lawmakers “will repeal a lot” of the EV tax credits, Rep. Michael Rulli (R-OH) told the Washington Examiner.
“Originally, when we looked at it, I think it was a really interesting way of looking at the future,” Rulli said. “But I think the market always dictates what’s going to be bought. And if the market’s not dictating EVs, we have to go back to combustion.”
President Donald Trump has long criticized subsidies for EVs and said they will destroy the auto industry. Republicans argue that the tax credits distort the market.
The IRA provides a $7,500 tax credit for the purchase of a new electric vehicle. Some commercial EVs also benefit from the tax credits. The legislation also provides a credit of up to $4,000 for those who purchase qualified used electric vehicles.
“I’m for the federal government not getting involved in the market,” Rep. Gary Palmer (R-AL) told the Washington Examiner. “If there’s a market for EVs, it’ll work out. If there’s not, we shouldn’t be subsidizing EVs.”
Daren Bakst, the director of the Center for Energy & Environment at the libertarian Competitive Enterprise Institute, said there is wide support among conservatives to get rid of all EV credits.
For other green measures created or expanded by the IRA, such as subsidies for advanced manufacturing or clean energy, there is GOP support. That is in large part because the incentives have helped with projects in Republican districts.
But Bakst argued that Republicans should not take a “scalpel approach” when it comes to the IRA but rather cut as broadly as possible into the climate and clean energy provisions, which are estimated to cost $1 trillion between 2022 and 2031, according to the University of Pennsylvania’s Wharton School budget estimate.
“The default assumption is that we are getting rid of the [credits], and you better make a super compelling case … to actually keep any type of credits,” Bakst said.
Yet all efforts to end IRA subsidies are getting caught up in House Republicans’ failure to make progress in deciding how much and where to cut spending. The House Budget Committee was expected to mark up a budget resolution this week but it was delayed due to disagreements. Republicans need to agree on a budget resolution to move forward in the reconciliation process.
Democrats defend the credits not only on environmental grounds but also as a way to stay ahead of the global competition.
Battery-powered vehicle sales have grown domestically and worldwide, noted Sen. Martin Heinrich (D-NM), the top Democrat on the Energy and Natural Resources Committee.
“What we need to figure out as a country is do we want to benefit from that? Do we want to lead that?” Heinrich asked. “Or are we going to cede that space, that manufacturing space, to, primarily, China?”
The IRA put new sourcing requirements on EVs that qualify for the credits.
“My position has always been we should be building those EVs in the United States, and we should be working to bring as much of the supply chain for not even just EV batteries but batteries as a whole within the control of us as a nation and our allies,” Heinrich said.
GOP-led or swing states, such as Michigan, Georgia, North Carolina, and Tennessee, have benefited from the IRA terms and subsidies for EVs, according to the Alliance for Automotive Innovation.
“There’s still billions of dollars being poured into the infrastructure,” said John Higham, who is on the board of directors at the Electric Vehicle Association. “My hope is that those congressmen and senators in those red districts see that money flowing in and they know how important it is to their districts.”
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Higham added that these efforts by the Trump administration to roll back incentives promoting the EV have a “chilling effect” on the industry.
“There’s an industry-collective holding of the breath to see what happens next,” he said.