Governors' Wind Energy Coalition

Democrats’ proposed tax credits favoring union-built electric vehicles have been criticized by Sen. Joe Manchin (D-W.Va.) and foreign governments alike. And as Senators enter discussions with the parliamentarian on Democrats’ reconciliation package, procedural experts tell ME that the credits could face additional challenges comporting with the “Byrd rule” that prohibits “extraneous matters” unrelated to the budget from being considered in reconciliation.

The proposal offers a tax credit of $7,500 for purchasers of electric vehicles made in the U.S., with another $4,500 of tax credits available for those made with union labor.

But a critical question facing pro-union EV tax credits is whether they would have a significant fiscal, or budgetary, impact, Bill Hoagland, former staff director of the Senate Budget Committee who is now senior vice president at the Bipartisan Policy Center, told ME. Currently there aren’t many electric vehicles that fit the criteria of being made in America with union labor, meaning Democrats could struggle to prove people would actually use the bonus pro-union tax credit to the extent that there would be significant outlays from the federal government (in the form of subsidies).

Right now, the only vehicle that fits the criteria is the Chevy Bolt, according to Brian Rothenberg, spokesman for United Auto Workers, which supports the bonus credits for union-made EVs.

“It raises a yellow flag, not necessarily a red one,” Hoagland said. “I don’t think Republicans are going to be successful on challenging many of these, but this one is a tough, tough, call.”

But a lot more union and American-made EVs are coming — a case Democrats and the Biden administration have been eager to make, Rothenberg noted. President Joe Biden test-drove Ford’s new F-150 pickup truck during a visit to the company’s Detroit auto plant in May, and he returned to the city last month to take GM’s first electric Hummer for a spin.

“To prove there are actual government outlays using that tax credit shouldn’t be too hard to prove as these vehicles come online,” said Jamal Raad, executive director of Evergreen Action, an environmental group that supports the pro-union EV tax credits.

Zach Moller, director of the Economic Program at center-left think-tank Third Way, said the Congressional Budget Office, at the request of Democrats, could produce a score projecting how many qualified EVs there might be in the future. There is no specific number of vehicles that CBO would have to deem eligible for the credit to prove pro-union subsidies would have more than a “merely incidental” budgetary impact. The parliamentarian has wide latitude to make the call.

Manchin, whose state is home to a Toyota manufacturing facility, has derided the proposed tax credits as “not American”and bypassing workers who aren’t in a union, and several foreign governments have complained the proposal would unfairly target their automakers’ operations in the U.S.

It has been a point of tension between the Biden administration and several allies in Europe and Asia, with Canadian officials writing to senators Friday threatening to retaliate. Canadian Prime Minister Justin Trudeau offered extending the tax credits to Canadian-assembled cars and batteries as a potential solution, Pro’s Zi-Ann Lum reports.