CA Bill To Limit Tax-Funded Rebates To Cars Under $40,000

[liuping]

Fact: people buying $100k cars are the ones paying 90% of the taxes. Nothing annoys me more than someone who pays little or no income tax (many millions of people in the US) complaining about rich people who pay most of the taxes getting a tax rebate.

Not to mention the 8% sales tax on a $100k car. It does not seem like asking too much for them to give $2500 of the $8000 in sales tax back as an incentive to buy EV's over Ice Cars.

 

[FredTMC]

Gotta love this quote from Diarmuid O’Connell:

Source: Tesla Buyers Making Twice U.S. Average See Rebates in Danger - Bloomberg Business

Totally agree with Mr O'Connell. As a % of selling price it's a 2.5% rebate which is pretty small for customers Okay, make it a $2.5% rebate on all EVs.

Tesla has has done more than any other mfg to make EVs desirable to California customers, reduce pollution/smog in one of the worst cities (Los Angeles) and Cali lobbyist want to F it all up.

OBTW, as Mr O'Connell said... Tesla's brought thousands of jobs to Cali... Then throw in SpaceX and SolarCity. Talk about Biting the hand that feeds you! I live in Cali for nearly twenty years. It's truely "the land of fruits and nuts"

 

[saladman]

Not to wear too much tin foil in my hat, but it doesn't it seem like an odd coincidence that these incentives are vaporizing all over the country at the same time? And at the same time as the CARB is rethinking its definition of zero emissions? As well as the mandates?

Hold on to your hats and glasses folks, this isn't about rich people taking their unfair share of tax benefits, I think something much larger and more sinister is afoot. Wait for them to go after the selling of zev credits soon, making Tesla unprofitable in Wall Street eyes.

 

[cpa]

As long as we are discussing this proposed legislation: The California rebate(s) apply to any auto that has some sort of non-ICE method of propulsion. So, Prii and Volts get the same rebates as Leafs and Teslas. I agree that every mile driven on electricity eliminates a small amount of pollution, and the accumulative effect of the PHEV vehicles could improve air quality. But BEVs eliminate all pollution.

If politicians were sincere and not disingenuous about the whole rebate/incentive program, the amounts of these rebates would be larger for BEVs and less for PHEVs. But then, that is too sensible and would get them voted out of office next election.

 

[yobigd20]

Looks like Washington State is joining the cap on ev-rebates group, and their proposal is even lower: Washington State Proposes $35,000 Cap On Sales Tax Exemption For Electric Cars

 

[Incredulocious]

The California rebate(s) apply to any auto that has some sort of non-ICE method of propulsion. So, Prii and Volts get the same rebates as Leafs and Teslas.

If politicians were sincere and not disingenuous about the whole rebate/incentive program, the amounts of these rebates would be larger for BEVs and less for PHEVs. But then, that is too sensible and would get them voted out of office next election.

No, the California rebates are not the same for all vehicles – they do vary and PHEV's do get less:
https://energycenter.org/clean-vehicle-rebate-project

 

[Robert.Boston]

Looks like Washington State is joining the cap on ev-rebates group, and their proposal is even lower: Washington State Proposes $35,000 Cap On Sales Tax Exemption For Electric Cars

The first comment on this article is exactly on-point: if there is to be a change, it should be that the up to $35,000 of the sales price is exempted, so the buyer of a $37,000 Leaf only pays tax on $2,000, not $36,000. Any rule that has a big discontinuity, such as CA and WA are considering, distorts incentives.

For example, some models of the Leaf tip the scales at a bit of $35,000. I can easily imagine a dealer accepting $34,999 for a $37,000 car provided that the buyer also purchase an over-priced dealer extended warranty; otherwise, the offer price is $35,200. In that example, the only winner is the Nissan dealer.

 

[Incredulocious]

It would be better for CA to drop the credit altogether and instead waive the sales tax on the first $40,000 of an EV purchase. That shift would cap the benefit's cost without creating an odd discontinuity in the policy effect. All EVs are good for California's environment, so there should be some incentive for all. Such a shift would also make the savings available to everyone, instantly, rather than to only those with high enough taxable income to use the income tax credit (and with a long delay unless you file quarterly estimated taxes).

I like this idea a lot (at least for states with sales tax) though it creates a larger perceived "reward" for more expensive vehicles (up to the cut-off).

 

[astrotoy]

Senator Gaines is a conservative Republican in the bluest of states. Difficult for him to get any legislation passed. That said, from a public policy perspective there are two competing questions. We want cleaner air, so having more EV's is good. Rebates cost the state money, so does dirtier air. On the other hand, how many Californians would not buy a Tesla costing over $40K if they didn't get the $2500 rebate? That is, is the $2500 better spent on getting a person to buy an EV under $40K, who might have bought an ICE.

One example of an incentive that worked for us. Back in 2006 we bought a Civic Hybrid, to a large degree because that gave us a gold carpool sticker on the Bay Bridge, saving 30 minutes or so each day crossing the Bridge in rush hour. It was both a small financial advantage (saving the toll and wasted fuel in the wait to the toll plaza) and a major time and frustration advantage. After a few years, when the goal of increasing hybrid sales was achieved, the gold sticker was discontinued. We now have a white sticker for the Tesla.

 

[ThosEM]

I can only hope that this gets caught up in a "big picture" move to end cozy tax breaks for the wealthiest of us. Singling out EV purchases makes absolutely no sense in the grands scheme, given that the alternative purchases to be considered will be gas guzzling luxury cars. How many of our gang are former owners of S Classes, Hummers, QX56s, Escalades, or muscle cars and other 6L+ gas hogs? To the degree that high end rebates can be justified, they exist to attract those who can afford to guzzle gas over to cars that do not do that, and not to make life even easier for such folks.

 

[Robert.Boston]

@ThosEM, you indirectly suggest the best possible shift in tax policy: eliminate the EV tax credit but increase gasoline taxes significantly (say, an extra $1/gal, putting gas prices back where they were a year ago). Not only would this shift encourage EV purchases, but it would also tilt the tables towards all high-efficiency vehicles. And to those who would say that this would be a drag on the California economy, find some other tax/fee to reduce by an equivalent amount to make the change revenue-neutral.

 

[apacheguy]

Right, and because of some odd loophole, the gas tax actually went down (WTF?) when prices dropped. Makes no sense. If anything that's a sure sign to increase the rates. Otherwise the oil companies jack it up and inflate it which is why we now have well over $3 a gallon again.

 

[Rheazombi]

My 2 cents:

The whole point of these rebates is because EVs have a premium on them over gas cars. It's not really their fault, it's a new technology, the economies of scale aren't up to par with gas cars yet, and there's other added challenges EVs face like infrastructure issues, state laws prohibiting direct Tesla sales, and the factor of the 'unknown' for many people that puts people off buying EVs. A person who is willing to take the plunge, who in return gets a tax rebate is the least we can do to help balance the scales in a world stacked against the adoption of EVs.

The income of the person who is buying a new car shouldn't matter. A well-off guy can choose between a 70k Tesla or a 60k BMW. If you want one less gas car on the streets, the rebate now puts the Tesla on the same playing field as the BMW. He can now make a more informed decision about which car to buy. It's not about whether he can "afford" a Tesla without a rebate, it's about whether he feels like paying more for an EV. Just because someone is rich doesn't mean they're okay with paying more. Yes this is simplifying the issue, but on a large scale these things do appear to influence buyers.

A BMW off the streets is as valuable as a Kia off the streets. The atmosphere doesn't care about the income of the guy producing the CO2.

If we want more EVs on the streets, if we want Tesla and other brave companies making real EVs to be around long enough to make better and better and cheaper EVs, then we should want MORE incentives for EV buyers, not less.

The only thing I do wish they would do differently with the incentives is extend them so that Model 3 buyers can take full advantage of them.

 

[Evbwcaer]

My 2 cents:

The whole point of these rebates is because EVs have a premium on them over gas cars. It's not really their fault, it's a new technology, the economies of scale aren't up to par with gas cars yet, and there's other added challenges EVs face like infrastructure issues...

I've got to disagree. I argue that EV's don't have a premium, I think ICE and/or fossil fuel cars exist in a context where they are allowed to dump so many of their costs, their negative externalities, on others.

If the price of gasoline was equal to the cost of gasoline, EV's would be comparatively cheap. If we are going to give ICE cars this advantage, well then any free-market advocate would need to advocate for subsidies of equal value for EV's.....or better yet, let the free market work and don't let gasoline powered car dump all these costs on others/oceans/the future/the atmosphere/the military/and on and on.

Estimates put the subsidy on gasoline at around $3 to $12 per gallon. I picked $5 as a number, take a car that gets 30mpg, drive it 100,000 miles, and you are looking at about $16,500 in subsidies.

These are real costs...sure they are hard to quantify, but even at the conservative end of estimates the subsidy on ICE cars is way more than EV's.

Bottom line is that either fossil fuel producers need to start being charged for the costs their operations impose on non-consenting entities, or taxes need to be collected and dispersed accordingly.

Don't get rid of the EV subsidies until you get rid of the much larger ICE subsidies first.

 

[ChadS]

An anecdote to expand on some of these numbers: in 2008 the Government Accounting Office put the value of petroleum subsidies at about $2/gallon. I can't find a link to their report now, but unlike evbwcaer's numbers, that was just counting money directly to petroleum companies. It did not count the cost of war in the middle east, health benefits for the elderly and asthmatic, ground water cleanup from oil runoff, etc.

The Bush administration was considering a $2,500 incentive per PEV. Plug In America noted the GAO report and convinced them to make the federal tax credit range from $2,500 to $7,500 based on battery size. This is still far less than the average gas car gets. It's ridiculous that we take all of this money out of peoples' taxes and then spend it to lower the cost of burning something that results in more huge costs to clean up. I would definitely like to see the petroleum subsidies go away.

 

[Evbwcaer]

In fairness I should say that I acknowledge EVs are often fossil fueled, although using much less for a car of equivalent weight/power/size. I have no problem with EV's paying their fair share of fees/taxes/higher prices per unit to mitigate the negative externalities they impose....but it would be much less.

I had this idea for a garbage company where the truck, rather than compact the trash, grinds it into a fine powder and then blows it into the air and on the yards in the neighborhood. I'd call it, "Brian's Free Market Trash Company." You're dang right people would be mad, getting down to fundamentals though, it is absolutely analogous as what many industries do as their main function.

 

[astrotoy]

One major problem is that many (most) people cannot psychologically look at total cost of ownership when buying most anything - a home, a car, or even a light bulb. So they need to see savings in the purchase price. Hence the rebate. It is quite amazing to me that people still want to buy incandescent light bulbs when a LED bulb saves many time the purchase price over the lifetime of the bulb. Even the business model for Solar City counts on that fact, with the solar system "free" and monthly electric bills lower than those currently paid by the customer, rather than the more economical purchase and much greater savings on the electric bills.

 

[Robert.Boston]

One major problem is that many (most) people cannot psychologically look at total cost of ownership when buying most anything - a home, a car, or even a light bulb. So they need to see savings in the purchase price. Hence the rebate. It is quite amazing to me that people still want to buy incandescent light bulbs when a LED bulb saves many time the purchase price over the lifetime of the bulb. Even the business model for Solar City counts on that fact, with the solar system "free" and monthly electric bills lower than those currently paid by the customer, rather than the more economical purchase and much greater savings on the electric bills.

I agree, though there's an additional factor to consider (at least in the case of a big-ticket item like a car): up-front cash. Americans are notoriously bad about saving money, so sometimes the option that is cheap up front but costly down the line will win just because people can't scrape up enough cash. That doesn't explain light bulb purchase decisions, though.

 

[Vic_F]

CA is notoriously bad place for business, why kill incentives when it helps CA jobs.

 

[Rheazombi]

CA is notoriously bad place for business, why kill incentives when it helps CA jobs.

Yeah, it does seem somewhat... ironic/sad that a Californian politician would want to take away incentives for Californians who want to buy California-made cars.