Obama 2012 Budget Proposes Higher Tax Credit For Plug-In Cars

February 15, 2012

Two days ago, President Barack Obama released his proposed U.S. government budget for the fiscal year starting in October.

And in it, he followed through on a promise from his State of the Union address last month, by proposing to cut up to $4 billion in subsidies to the oil and gas industry.

The budget also suggested that the tax credit for purchase of an electric vehicle be raised from its current $7,500 to $10,000.

Obama's $3.8 trillion budget proposal was immediately dismissed by the Republican Party as a "campaign document," in the words of Senator Mitch McConnell (R-KY). It has little chance of being adopted in its current form.

Obama has called for a total of 1 million plug-in vehicles on U.S. roads by 2015, though that goal is viewed as a stretch by most industry analysts. The proposed budget repeats that goal.

Other energy-related goals included cutting 20 percent from energy use in buildings by 2020, cutting oil imports by one-third by 2025, and requiring utilities to produce 80 percent of their power from low- or zero-carbon sources by 2035.

Last year, in their first year of sales, roughly 17,000 plug-in vehicles were sold in the U.S. market. Sales of both the Nissan Leaf and the Chevrolet Volt exceeded those of the Toyota Prius hybrid in 2000, its first year on the market.

The majority of electric-car buyers took advantage of the tax credit, which ranges from $2,500 to $7,500, depending on the size of the vehicle's battery pack.

The Leaf, the Volt, the Tesla Roadster, and the Fisker Karma are all eligible for the maximum credit, which applies to cars with battery packs of 16 kilowatt-hours or higher.

The upcoming 2012 Toyota Prius Plug-In Hybrid will qualify for the minimum credit, which requires a pack of at least 4 kWh.

Many advocates, including Obama, have suggested the credit should be turned into a purchase rebate that buyers receive days or weeks after their purchase. The current credit can take as long as 15 months to reduce the buyer's tax bill.

At last month's Detroit Auto Show, Transportation Secretary Ray LaHood defended the plug-in tax credit, which has come under fire because it largely benefits wealthier car buyers who can afford the higher price of today's electric vehicles.

Critics suggest that early adopters in states like California would have bought plug-in cars even without the tax credit, especially models like the $109,000 Tesla Roadster and the $104,000 Fisker Karma.

Thus far, Congress has not approved a single Obama proposal for electric-car infrastructure or incentives.

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(c) 2012, High Gear Media.

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