It looks like the good ol' boys down at the capitol are going to prevail in their quest to kill the most generous tax incentive for electric vehicles in the nation.
I have been working on an article about living with an EV as an everyday driver. I've been on it for about a week and frankly, it sucks. I keep getting stuck on the discussion of how I was able to justify the car based on low acquisition costs thanks to federal and state tax subsidies and the low operating costs thanks to it being an EV. This discussion involves spreadsheets, the operating costs of my old daily driver, the price of electricity and blah, blah, blah. Boooorrrinnng. I still plan on doing a couple of articles on the positives and negatives of living with an EV as I think that would be interesting. But, rather than suffer you with my specific situation, I thought I would instead discuss the use of tax subsidies as they relate to EVs.
What prompted this change of direction is that last Thursday, the Georgia House of Representatives voted to do away with the $5,000 state income tax credit for purchasing or leasing an EV. Georgia
has had one of the most generous tax subsidies for EVs in the country which explains why Atlanta is the number one market for the Nissan Leaf in the U.S. The elimination of the tax credit was part of a larger piece of legislation designed to raise additional funds for transportation infrastructure. In addition to doing away with the tax credit, the legislation also raises the gas tax to 29 cents per gallon and slaps a $200 per year fee onto EVs ostensibly to collect the motor fuel taxes that EVs don't pay because they don't use gas. While this legislation is not a done deal (it still has to be voted on by the Senate and signed by the Governor), all signs point to it becoming law.
This was a very generous tax credit, not a tax deduction meaning that if you were to owe $5,000 in taxes for the year, your tax liability would be reduced to $0 and you would receive a full refund. Not only that, you had up to 5 years to use the credit. So if you only owed $3,000 the first year, you could carry over the remaining credit into the next year and so on. The one catch is that you actually have to have a tax liability in order to qualify for the credit. This is what is known as a first world problem.
Disclaimer: I took full advantage of both the federal and state tax credits when leasing my 2012 Nissan Leaf.
Now in principal, I am opposed to subsidies or the government attempting to "pick winners and losers" as it were. But with that said, there are some society-wide advantages to electric vehicles that one has to consider. See below:
Less Dependence on Foreign Oil – Now I don't want to turn this into a political discussion. That is not my intention. However, we all know that the people we buy oil from in the Middle East generally don't like us. And we have wasted a lot of time, energy and young lives dealing with these idiots. So anything that lessens oil consumption from foreign sources is a good thing.
Lower Prices at the Pump for Everyone – Because alternative fuel vehicles don't use gasoline, it means there is less demand which leads to lower prices. Based on the 18 mpg that my old Jeep got and the 27,000 electric miles I have driven so far, I have forgone the use of 1,500 gallons of fuel (you're welcome).
Better for the Environment – Ok, again, not political. I don't necessarily believe that man-made climate change is real or that the "science is settled". However, I also don't know it not to be true. What I do know is that if I start up my Porsche in the garage with the door shut, it will eventually kill me. My Leaf on the other hand could sit in my 4 year old daughter's room running all night and she wouldn't even know it was there. Well, she might notice the giant white orb with the flashing blue lights, but you get my point.
Most EVs Charge at Night – I don't know how much you know about electricity production or infrastructure, but think about this: Electricity demand usually hits its peak around 4:00 in the afternoon during the summer. Therefore, the power company has to build enough capacity to keep up with this peak demand. However, at night when things cool off or during the winter, demand drops significantly. Now, all of that additional capacity is idle. It may sound crazy, but EVs charging at night help to level demand. This is a good thing because it means that the power company can recoup some of the investment it has to make to deal with peak demand. That's why the power companies are actually encouraging EV adoption. My Leaf is programmed to be fully charged by 6:30 a.m. every morning.
Georgia Doesn't Produce or Refine Oil – According to the Union of Concerned Scientists:
"......the money that EV drivers spend on fuel goes to power companies that employ Georgians, pay local taxes, and have a stake in the state economy. In contrast, a majority of the money drivers spend to fill up conventional vehicles pays for crude oil, which is extracted and refined outside Georgia. For every dollar spent on gasoline in the United States in the past five years, 71 cents went to extracting and refining crude oil, while less than a dime went to the local gas station."
In fact 30% of Georgia's electricity comes from nuclear.
EVs Save Money - In my case, when gas was $3.50 a gallon, I calculated that going electric saved me roughly $137/month in fueling costs ($38/month vs $175/month). Imagine reducing your fueling costs by 78%. That's money that could be spent in other areas of the economy. Win!
In Order to Get the Credit, You Actually Have to Buy the Product – Unlike with Solyndra, et al, the primary beneficiaries of these credits are tax payers. Yes, the manufacturers benefit indirectly, but it costs money to own and drive an EV and it still has to function as a car.
We Don't Look Like A Bunch of Unsophisticated Rednecks - It seemed for once, the state that I have called home my entire life was actually looked upon in a positive light by the rest of the country. Articles were being written about how Georgia was leading the nation in EV adoption rather than the things in which we usually lead the nation like unemployment, underwater mortgages, teen pregnancy, poverty and crooked politicians.
Now, do all of these good things equal $7,500 in federal tax credits and $5,000 in state credits? I don't know. But in our zest to rid the tax code of these types of subsidies let's not lose sight of some of the positives.
Now it's your turn. What do you think of these types of tax incentives in light of the above discussion? Are they fair? Are they worth it?