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Congress Must Stop Subsidizing Wealthy Car Buyers

A Commentary By Stephen Moore

Tuesday, December 10, 2019

Why are Democrats Sen. Chuck Schumer and House Speaker Nancy Pelosi teaming together to lobby for a tax bill that would provide about 80% of the benefits to Americans who make more than $100,000 a year?

Schumer and Pelosi are the ones who, for the last two years, have been railing against income inequality and tax cuts for the rich, but now they are head cheerleaders for a bill that would extend and even expand tax favors padding the pockets of mostly wealthy Americans who can afford to buy pricey Tesla and GM electric vehicles. The price tag for taxpayers could reach $16 billion for this bill.

What's next, tax breaks for buying a Porsche or a Rolls Royce?

Half of the tax breaks would go to residents of just one state. Guess which one? California, the home state of Pelosi. Coincidence? The voters of 49 states would get stuck paying most of the tab to underwrite the cars of those living in Silicon Valley.

These tax credits are far and away more generous than the rebates the car dealerships typically use to entice buyers. Uncle Sam offers a $7,500 tax credit for electric car buyers -- a policy that is supposed to be phased out this year for the two biggest manufacturers, Tesla and GM. Surprise, surprise; they are lobbying furiously to keep the money flowing.

Schumer has threatened to hold this year's tax bill hostage if the Tesla "temporary" subsidy isn't renewed. The credits are to be phased out beginning next year, but the Senate bill would give them a new lease on life. The House bill is even worse: It would triple the existing cap on subsidies of 200,000 per manufacturer. There is also talk in the House of creating a new credit of up to $2,500 for used electric vehicles. So you buy it, you get $7,500, and when you sell it, the new buyer gets $2,500 on the same vehicle.

The bill also includes billions of dollars for extensions of wind and solar subsidies (that were also supposed to expire many years ago). They even added in $5 billion of new spending on "environmental justice" grants to universities -- as if green campus leftists needed any more help.

The head start program for EVs is especially egregious because, as my Heritage Foundation colleague and economist Nick Loris notes, many states have their own EV incentives, and in these states taxpayers are essentially writing a $10,000 rebate check to EV drivers. Loris also notes that because EVs don't use gasoline at the pump, they receive an added subsidy because they don't pay directly for the roads, highways and bridges they use.

Even worse, while Congress is preparing to expand this program, the Treasury inspector general has recently uncovered rampant fraud. The inspector general found an astonishing 16,510 tax returns with "potentially erroneous" electric vehicle tax credits, worth a total of $73.8 million.

It appears that credits are being claimed for ineligible vehicles and that many leased vehicles are being fraudulently double-subsidized with one valid claim by the leasing company and a second, invalid claim by the lessee. The additional $2,500 per vehicle credit for the sale of used EVs will open a whole new garage full of fraudulent claims.

"The credit is working. It just needs a little more time," says Genevieve Cullen, president of the Electric Drive Transportation Association. But experience teaches us that these green subsidies never go away once they are extended. They become lifetime entitlements.

The biggest single beneficiary of the EV tax subsidy is Tesla founder Elon Musk. He is a billionaire, and if Congress extends the tax credits, the value will be capitalized into Tesla stock, and he is about to get a lot richer. Rather than unworkable wealth taxes on America's millionaires and billionaires, wouldn't it be better if Pelosi and Schumer stopped subsidizing them?

Stephen Moore is a senior fellow at the Heritage Foundation and an economic consultant with FreedomWorks. He is the co-author of "Trumponomics: Inside the America First Plan to Revive the American Economy." To find out more about Stephen Moore and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.

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