Proposed Legislation Aims To Repeal Electric Vehicle Federal Rebate

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Rep. Mike Kelly (R-Pa) has filed HR 3768, which is a proposal to put a stop to the $7500 tax credit for electric car purchasers. The measure is now being considered by the U.S. House of Representatives. Ironically, Rep. Kelly is a Chevy Car Dealer by profession.

The bill is entitled “To Amend the Internal Revenue Code of 1986 To Repeal the Credit for Plug-In Electric Drive Vehicles.” The bill would amend the IRS Code section that provides the electric car tax credit purchase to be terminated from its application. This tax credit amounts to $7,500 and has been derisively called “Obama’s tax credit”. The tax credit became law with the Emergency Economic Stabilization Act of 2008 as a rider to the bailout package for the financial industry after the most recent recession. The law came into being when George W. Bush was still holding the presidency.

The bill has deep meaning for Rep. Kelly, who inherited his father’s GM dealership and was almost terminated when General Motors went belly up. When the new administration’s Auto Task Force recommended the closure of nearly 2,000 dealerships, including Kelly’s own dealership. As a response, he fought the recommendation to close his dealership and then ran for Congress. Clearly, this is a man on a mission against the Obama administration and their actions around the car industry. There have been unconfirmed reports that his dealership refused to carry the Chevy Volt and supposedly fired an employee who consented to GM’s request that the dealership have a Volt in their showroom.

In an opinion editorial piece, Rep Kelly said that “tax subsidies are largely going to the affluent few who can actually afford to buy an electric car, which costs anywhere between $40,000 (Chevy Volt) to $97, 000 for the Fisker Karma.” He further buttresses his argument by saying that “the average income of Chevy Volt buyers is $175,000 a year, a large percentage of whom are disproportionately concentrated throughout Southern California.”

He continues to blast the weak demand for the Chevy Volt with the following figures. He claims, “In September 2011, GM sold just 723 Volts. By comparison, 18,097 Chevy Cruzes, 5,246 Chevy Suburbans and 2,171 Chevy Colorado Pickups were sold in the same time span.”

He closes his op-ed with a quote of distinguished MIT Professors Thomas H. Lee, Ben Ball Jr and Richard Tabors saying, “The experience of the 1970s and 1980s taught us that if a technology is commercially viable, then government support is not needed and if a technology is not commercially viable, then government support is not needed and no amount of government support will make it so.”

States offering Electric Car Incentives

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Nearly half of the states in the Union are jumping on the bandwagon to jump-start the electric car market. Their support would be in the form of incentives to purchasers of the green vehicles.

The programs, which include rebates and access to carpool lanes, has provided come ons to make the vehicles more affordable and convenient for the common car owner. These benefits include a federal tax credit of up to $7,500 which makes the once expensive vehicle to the price range of common internal combustion cars.

Automakers have also started to roll out the first commercially available electric cars for purchase. Nissan has unveiled its Leaf ($33,630 SRP), a fully electric vehicle while Chevrolet has begun to sell the Volt ($41,000 SRP), a plug in that has an onboard generator powered by an auxiliary gas engine. Nissan has introduced the Leaf in states with EV incentive plans in place, namely California, Arizona, Oregon, Washington and Tennessee.

Seventeen states already provide benefits packages for EV purchases. In California, there is a $5,000 state rebate plus the federal tax credit of $7,500 reducing the purchase price of the Leaf to $22,500. Five other states, namely Connecticut, Massachusetts, New York, Pennsylvania and Texas are in the midst of approving legislation towards providing incentives for electric car purchases.

Other non-monetary incentives, such as EV cars use of carpool lanes even without passengers, are already in effect in Arizona, California, Florida, Georgia, Maryland, New Jersey and Utah. There is even greater activity in California as 75,000 hybrid drivers who would be losing carpool lane privileges may switch to EVs to retain these perks.

Louisiana, Hawaii and Washington are providing tax credits and other discounts to cut the price of home charging stations, which are pricey at $1,200 a unit. Maryland, New Jersey and Washington EV purchases are exempt from sales taxes for a savings as high as 6.5%.

Jorge Santana, Pennsylvania State Rep Tony Payton’s Chief of Staff, said that the goal is to create an environment that’s conducive to the marketplace. Adding to that, Gustavo Collantes, Washington State’s Energy Policy Adviser, says that these incentive programs are sending the right signals to car and parts makers to locate the plants within Washington.