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New bill aims to cut electric-vehicle tax credits

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New bill aims to cut electric-vehicle tax credits

New legislation introduced in the Senate on Oct. 9 would end federal electric-vehicle tax credits while requiring those drivers to help fund public roads.

Sen. John Barrasso, R-Wyo., chairman of the Senate Committee on Environment and Public Works, introduced the Fairness for Every Driver Act to end the credits and impose a fee on electric-vehicle drivers, according to a press release.

The act would kill the tax credit of up to $7,500 that drivers can receive if they buy an electric vehicle in the U.S.

"The electric-vehicle tax credit largely benefits the wealthiest Americans and costs taxpayers billions of dollars," Barrasso said in the release, which cited Manhattan Institute think-tank estimates of savings of approximately $20 billion in taxpayer funds over the next 10 years with a tax cut.

The legislation would only apply to electric vehicles placed in service 30 days after the enactment of the legislation.

The Fairness for Every Driver Act would also require electric-vehicle drivers to pay a fee that would go to the Highway Trust Fund, which helps finance public roads. The fee would be "collected in the same manner as taxes," according to the legislation.

Drivers of vehicles that use gasoline or diesel fuel already pay federal taxes of 18.4 cents and 24.4 cents, respectively, to the fund, according to the U.S. Energy Information Administration.

This fee would be determined by the Treasury and Transportation departments, according to a staffer with Barrasso's committee, adding that it would be comparable to the taxes paid by gas- and diesel-fueled vehicles.

"My legislation levels the playing field for all drivers across America," Barrasso said in the release. "Gas, electric, and alternative fuel vehicles use the same roads. All should contribute to maintain them. My bill supports the Highway Trust Fund by making sure all drivers pay into the account that improves America's roads."

Barrasso wrote in an op-ed for Investor's Business Daily on Oct. 5 that the Highway Trust Fund will run out of money in 2021.

"While there are some that want to raise gas taxes to top up the fund, I do not," he wrote. "Raising the gas tax disproportionately hurts lower-income families and ignores the changing landscape of rising energy efficient vehicles."

The electric-vehicle tax credit is already set to be phased out for each automaker once that manufacturer hits 200,000 electric vehicles sold, according to the Energy Department. Tesla Inc. hit that cap in July, and General Motors Co. is getting close, with approximately 184,000 electric or plug-in hybrid vehicles sold through June, Reuters reported.

The tax credit phases out "over the one-year period beginning with the second calendar quarter after the calendar quarter" where the automaker hit the 200,000 cap, according to the Internal Revenue Service. Electric-vehicle drivers are eligible for 50% of the credit if the vehicle was purchased in the first two quarters of the phase-out period, according to the IRS. They are eligible for 25% of the credit if the vehicle was purchased in the third or fourth quarter of the phase-out period.

In Tesla's case, vehicles purchased by Dec. 31 will still receive $7,500, then it drops to $3,750 for purchases between Jan. 1, 2019, and June 30, 2019, and finally to $1,875 for purchases between July 1, 2019, and Dec. 31, 2019, according to Tesla.