Democrats plus up the EV tax credit—and more for union-made cars.

By the Wall Street Editorial Board, September 18, 2021

What Democrats’ $3.5 trillion budget bill taketh from affluent Americans in higher taxes, it giveth some back in green welfare. Behold their gussied-up $12,500 electric-vehicle handout.

Electric vehicles make up a mere 3% of car sales in the U.S. despite the current $7,500 federal tax credit and generous state subsidies. About 40% of the country’s EV registrations are in California, which offers EV buyers rebates up to $7,000, access to carpool lanes and lower electric rates. Nearly 80% of battery-powered cars sold last year in California were Teslas.

What Democrats’ $3.5 trillion budget bill taketh from affluent Americans in higher taxes, it giveth some back in green welfare. Behold their gussied-up $12,500 electric-vehicle handout.

An electric vehicle costs between $10,000 and $15,000 more than a similar gas-powered model, which is why they remain a luxury item purchased mainly by coastal dwellers who have cash to burn. Democrats are effectively conceding this in their bill.

The bill in the House Ways and Means Committee would extend the existing $7,500 EV tax credit through 2031 and remove the 200,000 car per-manufacturer cap, which both GM and Tesla have hit. Currently there’s no vehicle price-limit on the credit, so people can use it to buy electric Porsche s. Anyone who can afford a Porsche doesn’t need government help to buy one.

As a small bow to their class-war principles, the new EV tax credit excludes sedans costing more than $55,000, SUVs above $69,000 and trucks above $74,000. But these limits would disqualify only a few luxury and sports car models. Eligibility would extend to couples making up to $800,000 (and individuals up to $400,000). The tax-rate increase in the House Ways and Means bill hits at $450,000 for couples, so buy a Tesla and wipe out part of that new tax penalty.

The bill also creates a $1,250 to $2,500 tax credit (depending on battery capacity) for used electric cars, which would phase out for couples making more than $150,000. Democrats don’t want the middle-class buying used Priuses in lieu of new, more expensive EVs that auto makers are being forced to make to comply with the Biden Administration’s fuel-economy rules.

Democrats are also sweetening the tax credit by $4,500 for EVs produced at facilities “under a union-negotiated collective bargaining agreement” and an additional $500 if their battery cells are made in the U.S. This is to help U.S. auto makers whose plants are unionized and have higher labor costs.

They also want to help their United Auto Workers friends organize Tesla and foreign-owned plants. The $4,500 fillip would put non-unionized manufacturers at a competitive disadvantage, so they have no choice but to roll over to the UAW. Democrats don’t care about workers at foreign-owned car plants in the South because they are almost all represented by Republicans and the workers have consistently voted against joining the United Auto Workers.

The $12,500 EV tax credit exposes a central contradiction of the vast spending bill. Democrats want to raise taxes on the affluent while at the same time subsidizing them to embrace their green priorities. The bill will be paid by middle-class workers and families.