In lobbying battle for electric vehicle tax credit, it’s car makers vs. the oil and gas industry

Source: By Steven Mufson, Washington Post • Posted: Thursday, June 27, 2019

A federal tax credit that has boosted electric car sales is starting to run out.

General Motors chief executive Mary Barra meets with lawmakers on Capitol Hill in June. (Chip Somodevilla/Getty Images)

When the chief executive of General Motors came to Washington earlier this month, she huddled with a handful of her best allies in Congress: the Michigan delegation.

That state’s senior senator, Debbie Stabenow (D), says Mary Barra asked her to bring together members from both parties in part to stress the company’s commitment to building electric cars. In 2019 alone, the company said it will add 400 jobs to its Orion, Mich., plant to build a new electric Chevrolet and previewed its first electric Cadillac.

But to sell these cars — and keep these jobs — Barra wanted their help.

GM, like a fleet of other car manufacturers, is seeking the extension of a tax break that has for a decade helped sustain the sale of cars that need little to no gasoline to run.

This has triggered an intense lobbying battle with oil and natural gas companies, which supply the fuel that runs the internal-combustion engines that dominate American roadways.

It’s not just about the money: Electric vehicle sales could also help determine whether the United States can curtail the buildup of climate-warming gases from tailpipes and the rest of the transportation sector, which recently surpassedpower plants as the country’s top source of carbon dioxide emissions.

Oil and gas companies, said electric car proponent Rep. Daniel Kildee (D-Mich.), “prefer a world where every vehicle spews greenhouse gases, and this is not the world that I’m trying to encourage.”

Kildee, along with Stabenow, sponsored legislation to expand the quota of tax credits so companies would be able to sell three times as many electric vehicles before the tax credits, originally offered as a lifeline after the 2008 financial crisis, start to run out.

But oil and gas interests say extending the tax credit would be unfair to middle- and lower-class consumers who are unable to afford electric cars. And they’re making inroads with their own Republican allies.

“Regardless of whether you support the tax credit for electric vehicles or not, there is no denying taxpayers are overwhelmingly subsidizing Americans that can afford to buy their own car,” said Sen. John Barrasso (R-Wyo.), chairman of the Senate Environment and Public Works Committee who has proposed legislation to wipe out the tax credit. “If you want an electric car you can buy one — there are more available now than ever before.”

Here’s how the program now works: The federal government provides a tax credit of $7,500 to buyers for the first 200,000 electric vehicles sold by each company. After a manufacturer sells that first tranche, the tax credit drops by half for cars sold over the next six months — then by half again for another six months before disappearing entirely.

The loss of the credits will hurt those companies at the forefront of electric vehicle development, erasing their advantage over gasoline-powered cars and putting them at a disadvantage to other makers of electric vehicles.

Electric-vehicle advocates are petitioning Congress to allow consumers to earn a tax credit of at least $7,000 for 600,000 vehicles from a single carmaker before the credits start to phase out. Though more than 1 million electric vehicles are on the road in the United States, that represents a tiny sliver of the more than 270 million registered cars.

Two major auto companies, Tesla and GM, have already crashed into the 200,000-car threshold. Two more, Nissan and Toyota, probably will run into the same problem by 2021.

Tesla’s tax credit could be trimmed to $1,875 per vehicle as early as next month. And the company said in its recent annual report that the credits will expire altogether by the end of the year. That, it said, “could have some negative impact on demand for our vehicles, and we and our customers may have to adjust to them.

Stabenow and Kildee crafted their bill for months in consultation with major automakers. Three of them — Tesla, GM and Nissan — helped form the EV Drive Coalition late last year to press for passage of an extension.

Not only does the legislation have the backing of the powerful Alliance of Automobile Manufacturers, which represents a dozen automakers including GM, it also has the support of several major environmental and public health groups. They include the Sierra Club and the American Lung Association, as well as the Edison Electric Institute, which represents the investor-owned electric utilities that would help power the plug-in cars.

It also, crucially, has the support of two Senate Republicans, Susan Collins of Maine and Lamar Alexander of Tennessee.

Yet opponents, in their own blitz of studies, op-eds and meetings with lawmakers, are emphasizing what they see as the economic downsides of the tax credit.

Derrick Morgan, senior vice president of the American Fuel and Petrochemical Manufacturers, said he has “met with dozens and dozens” of lawmakers to highlight the high cost of the tax break. The trade association, which represents refiners, worked with Ernst & Young to calculatethat lawmakers’ plan to extend the tax break bill could cost the federal government $15.7 billion over 10 years. By comparison, the Joint Committee on Taxation estimates the government will spend $7.5 billion on the current credit between fiscal years 2018 and 2022.

“We have nothing against electric vehicles,” Morgan said. “Our thing is that we would like to have an even playing field.”

Similarly, the lobbying arm of the Institute for Energy Research, which is supported by the oil industry and the Charles Koch-backed group Freedom Partners, delivered in December copies of another study to congressional offices suggesting that eliminating the quota on the tax credit would cost U.S. households $95 billion by 2035. That study was commissioned by Flint Hills Resources, a refining subsidiary of Koch Industries.

Leading the charge is the president of the Institute for Energy Research, Thomas J. Pyle, a former Koch Industries lobbyist who organized a coalition of groups opposed to the tax credit and sent a letter to members of Congress explaining their position.

“It was never meant to be a permanent tax incentive giving a permanent advantage over other forms of technology,” Pyle said of the credit.

Pyle and other opponents, including the American Petroleum Institute, also note that the credit benefits individuals wealthy enough to buy electric vehicles, which tend to be expensive.

They cite a study by the right-wing Pacific Research Institute that found that 79 percent of the tax credits were claimed by households with an adjusted gross income of more than $100,000.

This could resonate in swing states. “You’re basically asking Iowa voters to subsidize wealthy Californians,” said Pyle, who along with other tax credit opponents plans to zero in on members of Congress who represent those too poor to buy electric vehicles.

Buyers of new cars, regardless of whether they are electric, tend to be high earners. But the Pacific study is consistent with one done in 2015 by the Haas School of Business at the University of California at Berkeley, which said that the top income quintile of taxpayers received about 90 percent of all the credits.

Not all research swirling around the lobbying ecosystem is as solid, though: The Institute for Energy Research also published surveys that suggests voters don’t support electric-car subsidies. But outside polling experts such as Michael Traugott, a professor and polling expert at the University of Michigan, say that polling appears biased. It focuses on mostly Southern and Midwestern states and “frames the whole interview in terms of trust in the federal government.”

Proponents of the credit argue that the oil industry has received similarly sized tax breaks. “I find it ironic when the industry that has had the longest-running tax credits in the code somehow objects,” Stabenow said.

Right now, she is trying to figure out how to get the tax credit extension into a must-pass piece of legislation — possibly one introduced earlier this year by Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, and Sen. Ron Wyden (Ore.), the ranking Democrat on the committee, that extended a variety of tax provisions.

Stabenow, who sits on that committee’s task force for examining energy tax credits, wants to persuade him to include the EV credits. His spokesman would not comment on the credits.

All tax legislation, however, must originate in the House. The fact that a majority of Democrats on the tax-writing Ways and Means Committee has sponsored Kildee’s electric-vehicle bill bodes well for the measure.

But opposition is coalescing. No House Republican has yet endorsed the bill, despite outreach from its sponsors. The tea party group FreedomWorks is circulating a draft letter from Rep. Alex Mooney (R-W.Va.) that opposes the extension and amplifies the polling and studies done by the right-wing institutes.

And maybe the biggest obstacle: The White House’s Office of Management and Budget, run by fiscal hawk Mick Mulvaney, called in March for ending the tax credit altogether.