Tax Situationer for the Electric Car Revolution

dollarbills
dollarbills

There are two different scenarios that are currently playing all across America. With the second term of President Obama, the thrust on the further development of electric cars is further pushed to the forefront, to which the United States receives in different manners.

At the behest of Governor Bob McDonnell, a new proposal is being discussed at the State Legislature, proposing the state’s ‘stagnant’ gasoline tax to be replaced by a new sales tax (0.8 cents on the dollar), a new registration fee for every new car (US$15 per new vehicle), and a new annual fee for plug-in and hybrid cars (US$100 per vehicle).

His rationale is that the sales low gas tax, which has been pegged at 17.5 cents to a gallon since 1986, is not enough. The sales tax would benefit the transportation sector for the benefit of everyone. Unfortunately, this shortsighted program fails to realize that the gas guzzlers would pay less to operate their vehicles, while at the same time penalizing those that opt to utilize more efficient modes of transport. This is also an indirect attack on the burgeoning electric car market yet at the same time protecting the interests of oil merchants and perpetuates oil dependency.

On another front, the recent fiscal cliff negotiations have produced positive results in the realm of green energy programs. Amongst them is the Alternative Fuel Vehicle Refueling Property Credit, or in layman’s terms, the US1,000 tax credit allotment for the installation of home electric vehicle charging stations. While this can be claimed still even for those installed in 2012, other improvements include extension of this credit to business and investment users to a maximum of thirty percent credit, or roughly US$30,000 per site.

The home charger, in order to be eligible, is dependent on the electric vehicle owned. Plug in hybrids and range extended EVs have smaller battery arrays in them and would require shorter charging times. On the other hand, full battery electric vehicles would have larger battery arrays so there is a need for quicker higher volume chargers.

Those that have availed of this credit and its incidents are advised to contact their tax advisors on how to best utilize the maximum benefit of this tax credit.

Clearly, there is a dichotomy in the landscape of the electric car revolution.

New Laws Affects the Future of Electric Cars

some cars at zero pollution
some cars at zero pollution

New legislative measures are being proposed in Arizona and elsewhere, that would seek to impose additional taxes from owners of electric cars.

This is a reaction to the growing population of electric, as well as alternative fuel cars, that start to fill up the nation’s highways. For its supporters, since they also use the same highway system, they should also be charged for the costs to build and maintain the network of roads and bridges. The status quo now is that gasoline fueled cars pay to defray the costs of maintaining highways and roads.

One of the first proposed legislations was filed by Arizona Representative Steve Farley with House Bill No. 2257. The bill is to impose a vehicle mileage tax on electric vehicles pegged at $.01 per driven mile. This proposed measure gives the Arizona Highway Department the authority to collect the tax and create the implementing rules and regulations for its operation. There is also an automatic clause that increases the tax that uses the Gross Domestic Product of the country as its yardstick.

Other states have followed suit and have already existing laws to that effect. There have been previous incidents where biodiesel activists have been arrested for their failure to pay road taxes. They fall within the purview of the tax measure because biodiesel made at home falls within the category of home charged electric vehicles and this group is taxed because they fall outside the current system of cars that are chargeable for road taxes. Another measure has been proposed in Washington State that imposes a flat $100 fee per year per electric car over and above existing car taxes, in lieu of the mileage measurement per year requirement.

In order to pass, this measure would need a two thirds majority of the Arizona State Legislature.

The problem though is that there are only a few electric cars compared to the overall car population in the world today. The infrastructure cost is still minimal at best allowing for electric cars to still be around today. Putting up a tax system may only serve to be another setback to the full advent of the electric cars on the road. Until the electric cars rule the road, taxing them may not be a good idea in the long run.

States offering Electric Car Incentives

USflagIMAGE200
USflagIMAGE200

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.