Bipartisan Bill Announced to Expand Electric Vehicle Tax Credit

Sketch of a piece of parchment with an inkblot in the bottom left corner, and a drawing of a handshake in the opposite corner.

In an encouraging sign of compromise, a bipartisan group of Senators introduced a bill on Wednesday that would retain and expand the federal electric vehicle tax credit.

Automakers currently receive a $7,500 tax credit for the first 200,000 electric vehicles sold. The Driving America Forward Act would grant each automaker a $7,000 tax credit for an additional 400,000 vehicles.

The fact that a bipartisan group of Senators introduced the bill means that it might actually have a chance of becoming law, even though it must go through a number of hurdles before it’s passed.  

The Trump administration and some Republicans had been threatening to cut the tax credit altogether, while some Democrats had been pushing to continue the credit indefinitely.

This bill is encouraging news for the electric vehicle industry, which could help accelerate adoption of electric vehicles.

But imposing a cap might not be the most efficient way to support the electric vehicle industry. Early adopters of electric vehicles, like Tesla and GM, are put at a disadvantage because they’d hit the cap much sooner than other companies. Indeed, both Tesla and GM are close or have already hit the 200,000 vehicle limit.

A more effective tactic might be setting one date where tax credits for any electric vehicle sold would phase out. This would encourage automakers that are behind on electric vehicle technology to speed up their efforts so they could take advantage of the tax credit.

Still, both plans have their pros and cons and any compromise on the legislative front is good news for the electric vehicle industry.