You Tell Us: Do Tesla Electric Cars Deserve The Same Tax Credits As Cheaper Plug-ins?

At a starting cash price of $71,050 — more than three-times the $22,995 entry-level price of Mitsubishi’s all-electric 2014 i-Miev hatchback — the Tesla Model S is sleek, sexy and desirable. If the sub six-second 0-60 time of the base model 60 kilowatt-hour Model S or the 4.2 second 0-60 time of the Model S P85 doesn’t get you, more than 200 miles of range per charge most certainly will, along with a centre console which owes more of its heritage to the age of the tablet computer than Detroit.

Should Tesla owners get the same tax credits and rebates as other EV owners?

Should Tesla owners get the same tax credits and rebates as other EV owners?

Yet despite their disparity in price, buying either brand new in the U.S. entitles you to $7,500 in Federal tax credits, provided of course you earn enough to amass a tax bill of more than $7,500, that is.  Unlike new legislation being proposed in the state of California to set a maximum income cap on those applying for up to $2,500 in purchase rebates under California’s own clean vehicle rebate program, Federal tax credits for electric cars are income agnostic.

Figures from the California Centre for Sustainable Energy — which runs and issues payments under CVRP program — suggest that more than half of Californian Tesla owners live in households with a total annual income of more than $300,000 per year.  With that in mind, is it fair that those who buy a high-end luxury plug-in car get the same rebates as an entry-level budget EV?

No, implies Christoper deMorro in a recent post on Gas2 (via Clean Technica) entitled “Tesla Owner Tax Rebates Could Total $1.5 Billion.”

With a little-known 200,000 limit per manufacturer on the number of electric cars eligible for the $7,500 Federal tax rebate for electric vehicle purchases, deMorro argues that the Model S’ starting price — more than double the average U.S. new car price — means that those wealthy enough to buy the Model S without a tax break are poised to take a total of $1.5 billion in Federal Tax rebates before Tesla hits the required 200,000 vehicle output needed for the IRS to restrict tax credits to Tesla owners.

While we agree with the notion that incentives really should only go to those who need them, something the State of California is on the brink of bringing to law, the there are a few key points missing from deMorro’s argument we feel it’s important to note.

How do you decide which cars are eligible and which aren't?

Should some cars be eligible and others not?

First of all, the Federal Tax Credits for Electric Vehicles program he refers to treats every vehicle in the same way. Along with a set of regulations requiring the vehicle to be 100% plug-in from new; have a motor vehicle weight rating of no more than 14,000 pounds; a battery which can be recharged from an external source of electricity and a battery pack larger than 4 kilowatt-hours in size, the rules credit phase out are the same for every vehicle.

As the IRS details, the amount of credit which can be claimed by a taxpayer wills tart to decrease “at the beginning of the second calendar quarter after the manufacturer produces 200,000 eligible plug-in vehicles as counted from January 1, 2010.” In other words, once the manufacturer makes its 200,000th plug-in vehicle, the amount of rebates available will drop, and it’s the same for every automaker.

That means the IRS is prepared to write-off up to $1.5 billion in credits for every plug-in car produced, not just expensive ones — and the total number of rebates available to Nissan LEAF owners or Mitsubishi i-Miev owners is technically the same as those available to Tesla owners.

The second point we’d like you to think about is the fact that not everyone who buys an electric car is wealthy. While nearly four-fifths of Californians claiming its own state incentive for electric vehicles had a total annual household income of $100,000 per year, there are those who buy an electric car who earn far less.

That’s true for Tesla owners as well as those who buy cheaper electric vehicles too. We’ve heard of people who have cashed in part of their 401k retirement fund to help buy a Model S, for example, scrimping and saving to be able to afford the base-model 60 kilowatt-hour model.

Is income contingency the only, fair way of ensuring incentives go to those who need them?

Is income contingency the only, fair way of ensuring incentives go to those who need them?

Others we’ve encountered have saved in other ways, forgoing family holidays or perhaps working overtime to be able to scrimp together enough funds for their dream car. While the minority, it could easily be argued that these owners deserve the tax credit, no matter what.

Of course, deMorro’s headline is meant to grab the reader’s attention — and it does. But perhaps the bigger question, and one he fails to ask, is at what point should electric car incentives be withdrawn completely?

When it was first put in place, the price of even an everyday electric vehicle like the Nissan LEAF was far above the affordability for most buyers. Since then the sticker price of cars like the Nissan LEAF, Chevrolet Volt and Mitsubishi i-Miev have dramatically dropped. The Mitsubishi i-Miev for example, initially went on sale for $29,125 before destination charges and incentives.  Now it’s available for just under $23,000 before incentives, a difference almost as big as the $7,5000 Federal Tax Credit.

Yet in terms of equality of buying, the majority of plug-in owners are still reasonably well-off and those who really could benefit from electric cars — lower-income families with older, low-mpg vehicles — are often unable to even afford something like a base-model i-Miev.

It’s a difficult topic, but one we think the electric car and Transport Evolved communities need to discuss.

So you tell us: should Tesla owners get the same incentives as those who buy less expensive cars? Should we even still have plug-in car incentives, or are they an essential carrot to encourage people to dump the pump for good?

Leave your thoughts in the Comments below.

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