$12,500 Federal EV Tax Credit Proposal Reportedly Dropped

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【Summary】The large boost to the federal tax credit for electric vehicles under President Joe Biden’s Build Back Better legislation is officially gone.

Original Vineeth Joel Patel    Aug 01, 2022 8:00 AM PT
$12,500 Federal EV Tax Credit Proposal Reportedly Dropped

The current $7,500 federal tax credit for electric vehicles is supposed to make electric cars more affordable for consumers. Last year, President Joe Biden and congressional Democrats looked to increase the amount consumers could receive to purchase an EV with the Build Back Better legislation. Under the plan, the amount would go from $7,500 to $12,500. Consumers that were excited at the prospect of being able to save more money on a purchase will be disappointed to hear that the proposed $12,500 federal tax credit has been dropped. 

Larger Federal Tax Credit Proposal Ditched

Bloomberg spoke with Senator Joe Manchin who confirmed that the proposed federal tax credit for electric vehicles has disappeared. "It's gone," Manchin said in an interview. Manchin, the Democratic Senator for West Virginia, has been one of the more vocal critics of the legislation since it was proposed last year. Bloomberg claims that Manchin was a swing vote in the evenly split Senate. 

Under the Build Back Better legislation, the federal tax credits for EVs would increase to $12,500 for certain vehicles. Things would continue to start at the $7,500 mark, but would go up by $12,500 for EVs built in America and an additional $2,500 for EVs that are built by a union workforce. Not only was Manchin opposed to the proposal, but Toyota, Honda, and Tesla all voiced their opposition to the proposal. The problem for Toyota and Honda is that its EVs aren't built in the U.S., while Tesla's electric cars aren't built by unionized workers. Manchin had other issues with the proposal. 

Why Was The Proposal Dropped?

As Bloomberg reports, Manchin openly criticized the proposal, claiming that it was "ludicrous." The Senator believes the $12,500 federal tax credit would subsidize a product that has an extensive waiting list. Instead, Manchin wants to incentive hydrogen vehicles. The outlet claims that Manchin has been looking to get stricter limits for the cost of eligible vehicles and stricter limits on the income for consumers that are eligible for the federal tax credit on EVs. 

While the $12,500 federal tax credit proposal is gone for good, at least for now, consumers can still receive the $7,500 tax credit on electric cars. At the time of writing, only two automakers have hit the 200,000-vehicle cap for when the federal tax credit disappears for consumers: Tesla and General Motors. Automakers recently reached out to Congress to lift the 200,000-vehicle cap, as Toyota, Ford, and Nissan are expected to hit the figure soon.  

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