Republicans briefly considered axing the electric-car credit in their tax reform bill, then decided to leave it in — with all the bill’s other benefits for the rich — at the urging of the auto industry. Carmakers insist now that the break should be not only retained but also, as General Motors CEO Mary Barra said March 7, “expanded, so our customers continue to receive the benefit going forward.” Current law says that the credit applies only to the first 200,000 plug-ins any manufacturer sells, and phases out over the year after the company hits that benchmark. GM has already sold about 160,000, as has Tesla, billionaire Elon Musk’s company. Ms. Barra therefore wants Congress to raise the 200,000-car limit or eliminate it altogether, according to the Wall Street Journal.
The automakers have a point: If Washington is going to require them to produce the vehicles, which have been slow to catch on with consumers in part due to their relatively high cost, the least it can do is help subsidize their sales. Maintaining the ceiling ironically punishes Tesla and GM for entering the market first, since they are about to exhaust their 200,000-car quotas just as European competitors are about to start on theirs.
Then again, Washington could just level the playing field by eliminating the tax break for everyone. At a minimum, Congress should allow the existing rule to phase out as planned. This issue poses a trade-off between two public policy goals — environmental quality and economic fairness. Tax subsidies to buy cars are far more efficient at worsening the latter than improving the former, in part because much of the electricity that fuels plug-in vehicles still derives from fossil fuel sources such as coal and natural gas. If electric vehicles are the wave of the future, they’ll have to survive on their own economically sooner or later. It should be sooner. Car corporations, billionaire entrepreneurs and their well-heeled customers have received enough assistance from the rest of us already.