This morning, Wyoming Senator John Barrasso, published an op-ed in Fox News, arguing for an end to the federal electric vehicle (EV) tax credit and a new “annual highway user fee for alternative-fuel vehicles.”
Barrasso, who has cashed more money from Koch Industries in the 2018 election cycle than all but two senators, and has taken in $45,400 from Koch Industries from 2013 to 2018, introduced a bill last October that would immediately amend the tax code to terminate the EV tax credit and calculate a new annual user fee for drivers of cars that aren’t powered by gasoline or diesel. A similar bill was introduced at the same time in the House by Ways and Means Chairman Kevin Brady of Texas, a key Koch ally.
Besides the Trump administration’s proposed rollback of fuel efficiency standards—which the Koch network and other oil and gas interests have been aggressively lobbying for—Barrasso’s proposal reflects a top policy priority of the Koch network, one that would greatly benefit oil refiners and gasoline marketers who are desperate to keep American drivers coming back to gas stations.
Senator Barrasso’s Op-Ed Echoes Koch Network Talking Points
If the Republican Senator’s op-ed sounds familiar, it’s probably because Barrasso repeats a number of talking points that Koch network representatives have been honing over the past year.
For instance, Barrasso writes that “Every time one of these cars sells, the U.S. taxpayer must help pay for it.”
Within just the past two months, we’ve seen some slight variation on this line in a number of opinion pieces and commentaries, all penned by beneficiaries of Koch cash. In December, Jonathan Lesser of the Manhattan Institute (which has received more than $2.6 million from Koch foundations) tried to paint the EV tax credit as “inequitable” in Investors Business Daily.
Just two weeks ago, Ross Marchand of the Taxpayers Protection Alliance (at least $1.1 million from Koch groups) bashed the “EV tax credit gravy train” and then a couple days later, Drew Johnson of the National Center for Public Policy Research (at least $1 million from Donors Trust and Donors Capital Fund) asked readers of the Austin American Statesmen to “Imagine taxing middle-class families to help rich folks buy luxury cars.”
What the Koch EV Attacks Leave Out
All of these commentators fail to mention a few crucial and relevant facts, besides their immediate ties to Koch funding.
1) First, while attempting to portray the EV tax credit as a “handout to the rich,” the Koch-funded advocates harp on one particular figure, as Johnson puts it: “Almost 80 percent of EV federal consumer tax credits go to households making more than $100,000 a year.”
This is deceptive and inaccurate framing that has been widely used in anti-EV arguments. To support the point, some authors cite a study by the Congressional Research Service (though most make the claim without any reference), which describes how in 2016, 57,066 individual taxpayers claimed $375 million in plug-in vehicle tax credits. Of these 57,066, 78% have an adjusted gross income of $100,000 or more.
However, as Wade Malone explains in InsideEVs, 158,614 plug-in vehicles were sold in 2016. What about the other 100,000 or so EVs? They were leased.
In this situation, leasing companies claim the $7,500 tax credit. The tax credit is then almost always applied directly or indirectly to reduce monthly lease payments. As a result, lease rates are typically in the same ballpark (or lower) than equivalent ICE vehicle leases.
Others cite older data from 2014 IRS filings that was promoted in a recent Pacific Research Institute study, which also ignores the significant role leases play in the EV market. Through 2017, the vast majority of EVs were leased—a full 80% of non-Tesla EVs and still well more than half of all EVs including Tesla, according to Bloomberg New Energy Finance.
As Malone explains, these leases have a trickle down effect of making EVs available to all economic classes.
This is appealing to many middle class buyers for a variety of reasons. The buyer is able to see an immediate reduction in their monthly payment rather than waiting until tax filing season to receive a full or partial tax credit. Secondly, EV tech is rapidly improving. Leasing allows buyers to drive for 3 or 4 years, then move on to the next generation of electrics.
When the vehicle is turned in at the end of a lease, the car hits the used market at a reduced price. Because a used electric car is no longer eligible for the $7,500 tax credit, dealers price it factoring in the full credit. Otherwise, purchasing new would be more cost effective over used. Because of this, middle class and lower middle class buyers can affordably finance a used EV or PHEV. It is not simply the wealthy who benefit.
2) While falsely claiming that 80% of all EV credits benefit households that earn more than $100,000, these op-eds ignore the fact that the average income of households that purchase any new vehicle—plug-in or gasoline powered—is even higher than that. According to a report by the National Center for Sustainable Transportation, the average household income for new car buyers was $119,400 in 2012.
3) Finally, the cost of the EV tax credit is a tiny fraction of the lost tax revenue that results from permanent tax breaks to the oil and gas industry. In his 2018 study for the Manhattan Institute, Lesser argues that the EV tax credit is costing the U.S. treasury hundreds of millions. To be precise, in 2017, this total was $670 million. However, according to the treasury’s own figures, oil and gas subsidies and tax credits cost $4.7 billion annually.
Or, if we repealed just nine tax breaks commonly used by oil and gas companies, as the Center for American Progress has calculated, the U.S. Treasury would save an average of $3.7 billion every year.
In his op-ed, Marchand wrote, “It’s tough to decide which is worse: a subsidized company that can’t survive without government largesse or a well-off successful business that doesn’t need taxpayers’ help but gets it anyway.” Yet, none of the self-described free market advocates are arguing to end the billions handed out to the very “well-off successful” oil and gas companies.
To summarize, EV tax credits benefit all income levels, especially when factoring in leases and secondary sales markets, and the entire EV tax credit program costs the U.S. Treasury a lot less than oil and gas tax breaks.
Senator Barrasso and Colleagues Echo Faulty Koch Claims
Promoting his “Fairness for Every Driver Act” in Fox News, Barrasso claims that the EV tax credit “disproportionately subsidizes wealthy car buyers.” He argues, without citation, that “eight out of 10 electric-car tax credits go to households earning at least $100,000.”
When Barrasso introduced the bill, the Senate Committee on Environment and Public Works, which he chairs, released a press release citing estimates from the Manhattan Institute that axing the tax credit would save $20 billion in taxpayer dollars over the next decade. Even if this estimate is true, the savings would be less than half of those achieved if the oil and gas industry’s permanent tax breaks were repealed.
The Manhattan Institute, which has received more than $2.6 million from Koch foundations, argued aggressively in 2011 for the preservation of the oil and gas tax breaks.
If Senator Barrasso’s bill were to move, it would have to clear the Senate Finance Committee and a comparable tax package would need to pass the House Ways and Means Committee. As Barrasso is no doubt well aware, the Koch network has already invested in those committees. Elliott Negin at the Union of Concerned Scientists noted, “Since 2013, Koch Industries has given $253,600 to 11 of the 14 Republicans on the Senate committee and $374,000 to 21 of the 24 Republicans on the House committee, including Chairman Brady.”
Before Senator Barrasso introduced his bill last year, Koch Industries’ lobbyist Philip Ellender sent a letter to various members of Congress asking for an end to the EV tax credit and all energy related subsidies
“Instead of expanding this subsidy for wealthy EV owners, Congress should eliminate it along with all other energy incentives — including eliminating any incentives given to us and our competitors where we may participate. We are focused on long-term value creation, not short-term windfalls.”
While the federal government would gain significantly more revenue by killing the tax breaks to wildly profitable oil and gas companies, Senator Barrasso’s legislation is only focused on the part of the Koch Industry’s request that would repeal the relatively small tax credit that makes it easier for Americans of all income levels to enjoy the economic and environmental benefits of electric vehicles.