Senator Joe Manchin has changed his mind about electric vehicles.
The West Virginia Democrat, who previously described federal tax credits for EVs as “ridiculous,” announced a surprise deal with Senate leader Chuck Schumer on a reconciliation package that includes $369 billion in climate and energy measures that aim to cut carbon emissions by 40 percent. percent by 2030.
The bill would allow car buyers to continue claiming the current $7,500 federal tax credit for the purchase of “clean vehicles” — the new preferred phrase describing plug-in hybrid, battery-electric and hydrogen fuel cell vehicles, replacing the old phrase “ newly qualified plug-in electrically powered motor vehicle.”
It would also lift the current cap of 200,000 vehicles before phasing out the tax credit, a huge win for companies like Tesla, Toyota and General Motors, which have all sold more than 200,000 EVs.
In an all-new provision, the bill includes a $4,000 tax credit on the purchase of a used clean vehicle, a potential boon to middle- and low-income car buyers who are less likely to afford a brand-new EV but still hope to switch to something less polluting.
And the bill changes the definition of eligible vehicles to include all vehicles produced in North America. An earlier version of the proposed tax cuts would have benefited US-based manufacturers, sparking outraged Canadian lobbies in Washington to change it.
There are some restrictions on who can claim a tax credit for the purchase of a new or used car. The deal includes a limit on the suggested retail price of eligible vehicles of $55,000 for new cars and $80,000 for pickup trucks, SUVs and vans. Credits would be capped at an income level of $150,000 for a single taxpayer and $300,000 for joint applicants for new vehicles and at $75,000 and $150,000 for used cars.
Other vehicles not eligible for tax credits include vehicles with batteries containing minerals that have been “extracted, processed, or recycled by a foreign entity of concern,” which is defined as a state sponsoring terrorism or countries blocked by the Office of Foreign Assets of the Ministry of Finance Control.
A previous proposal from President Joe Biden would have applied an additional $4,500 tax credit for electric vehicles made with unionized workers, but was dropped thanks to Manchin’s opposition — as well as opposition from non-union companies like Toyota and Tesla.
There are other new pots of money that are sure to excite the auto industry, including a $10 billion tax credit to build clean technology manufacturing facilities, such as an EV plant, and a $2 billion grant program to rebuild existing auto manufacturing facilities. “to produce clean vehicles and ensure that auto manufacturing jobs remain in the communities that depend on them.” And there is $1 billion for clean heavy vehicles, such as school and transit buses and garbage trucks.
In short, it’s the most the auto industry and EV makers have been asking for for months. “The passage of this bill will create millions of high-paying U.S. jobs in the clean transportation industry, dramatically lower energy and transportation costs for consumers, and improve public health by reducing carbon emissions and other pollution,” Joe Britton, executive director of Zero Emissions Transportation association, said in a statement. “America is deeply indebted to everyone who helped negotiate this bill.”
But until Thursday, supporters were under the impression that extensive tax cuts and other measures to boost EV sales were dead in the water. Manchin, a mercurial politician who has positioned himself as the casting vote in a split 50-50 Senate, had rejected attempts to subsidize the cost of EVs, calling current tax credits “wrong” and “unAmerican.” In March 2022, he said Manchin was “very reluctant to take the path of electric vehicles” and mocked the idea of the government spending money on infrastructure.
In a statement Thursday, Manchin described the so-called “Inflation Reduction Act of 2022” (Gone is the Biden administration’s brand name of “Build Back Better”) as a more comprehensive measure that “invests in the technologies needed for all fuel types — from hydrogen, nuclear, renewables, fossil fuels and energy storage — to produce and use in the cleanest way possible.”
But the bill isn’t a total win for clean transportation drivers. Tax credits for the purchase of electric bicycles were left on the floor of the cutting plant after they were passed as part of the House-approved Build Back Better legislation. While electric vehicles are certainly more virtuous than gas-powered vehicles, e-bikes are even better for the environment and public safety. They cost less to produce and have the potential to replace short car journeys that make up the bulk of driving, especially at a time of high gasoline prices.