‘Made In USA’ Electric Vehicle Tax Credits Promoted In House Reconciliation Bill

In a race with China to own the future of the electric vehicle, U.S. lawmakers on Wednesday said they were pushing a generous new tax credit for American-made electric vehicles they hope will not only combat climate change, but also rebuild domestic manufacturing.

“The future of the auto industry is electric,” said Rep. Debbie Dingell, a Democrat whose Michigan district includes America’s Detroit-based automobile industry. “A robust onshore electric vehicle manufacturing and supply chain industry will have a powerful impact in bringing good jobs back to this country.”

With critical legislation pending, Dingell joined other lawmakers and the White House to promote the $12,500 electric vehicle tax credits, as well as other policies designed to promote domestic production of electric vehicles, creating more jobs at home.  And not just any jobs, as several of the provisions are written to favor jobs represented by labor unions.

Officials also stressed China’s growing market share of electric vehicles as a cause for haste.

“China is investing heavily in electric vehicles. Those are the stakes we’re up against,” said Brian Deese, director of the National Economic Council, which advises the White House on economic policy.  “We’re out to win this market in the right way, while creating hundreds of thousands of union jobs.”

The tax credits are part of a $3.5 trillion spending package favored by President Joe Biden that Democrats are pressing in Congress. The legislation, which moved forward in several key House committees last week, would expand healthcare and childcare programs, while also funding policies designed to combat climate change, including the electric vehicle tax credit. Meanwhile, the price tag of the bill is an issue for some Democrats.

Likewise, Dingell promoted the tax credits, and their potential to reduce sticker shock for electric vehicles, as a key part of the policy.

“Many today see electric vehicles as too expensive. They’re seen as a luxury. Electric vehicles have to be more affordable,” she said. A 2019 report from McKinsey & Company showed that there was a $12,000 price gap between manufacturing an electric vehicle (and its pricey battery) and a conventional internal-combustion engine vehicle.

To lower the cost of an electric vehicle, the legislation offers American consumers what could be as much as a $12,500 rebate for the purchase of an electric vehicle. The tax credit is structured to come off the sticker price at the point of sale, making it easy for consumers to cash in on the rebate. And the biggest rewards of the targeted credits go to American-made vehicles, as the proposed credit of $7,500 tax credit for purchase of an electric vehicle would be boosted by $4,500 if the vehicle is made in the United States, with another $500 credit if the battery is American-made.

With a nod to automaker labor unions, the tax credit provision requires that at least 50 percent of the parts be made in the United States from a plant where workers are covered by a collective bargaining agreement.

But representatives of America’s non-unionized automakers said the measures were discriminatory against those companies and the workers who would make electric vehicles in the United States.

“The House Democrats’ complete disregard for the 673,000 Americans employed by international nameplate dealerships and manufacturers is more than insulting. It’s a slap in the face for all American workers who don’t align with the Democratic worldview that every workplace should be unionized and that American tax dollars should contribute to that goal,” said Cody Lusk, president and CEO of the American International Automobile Dealers Association. “International nameplate dealers and manufacturers will continue to refine EV technology and promote its acceptance in the United States. In the meantime, we only ask that the House Ways and Means committee stop playing politics with car sales.”

The tax credits, along with other policies to develop stronger consumer demand, were among Biden’s plan to promote electric vehicle adoption in the U.S., Deese said. The others include setting electric vehicle sales targets of 50 percent by 2030, as well as investing in research and development, manufacturing, and electric vehicle charging infrastructure.

Policy changes like these could pay big dividends for American workers, potentially creating 150,000 new jobs by 2030, according to a report from the Economic Policy Institute released on Wednesday. However, the report also said that failure to enact policies to promote domestic electric vehicle manufacture could cost as many as 75,000 over the same time period.

Dingell, Deese and other lawmakers spoke during an online panel promoting the report, which they said could help show other Democrats the benefits of the $3.5 trillion legislative package. But achieving all of these policy changes through legislation will face significant challenges. Some Democrats in the House and Senate, such as West Virginia Sen. Joe Manchin and Arizona Sen. Kyrsten Sinema, are pushing back on the $3.5 trillion spending package.

The $3.5 trillion spending bill that House Democrats are advancing is designed to follow the rules of budget reconciliation, restricting it to only spending and taxation changes, while also allowing it to skirt the Senate’s filibuster rule that requires 60 votes to move legislation forward.  With a 50-50 split in the Senate, the Democrats could pass the legislation with a party-line roll call aided by Vice President Kamala Harris’ tie-breaking vote, if Manchin, Sinema and other Democrats are on board.

To sell the proposals, Democrats are pointing not only to the potential benefit for U.S. manufacturing and its labor force, but also the challenge coming from China, which is also pressing forward with its electric vehicle manufacturing ambitions.

“China is spending $100 billion on their own electric vehicle and battery manufacturing infrastructure,” said Michigan Democrat Sen. Debbie Stabenow. “If they’re going to be doing more, we need to be doing more.”

The report also specifically pointed to the benefits that Biden’s electric vehicle manufacturing strategy would bring to union workers. The report showed that as unionization rates in the auto industry fell, so did the autoworkers’ pay advantage over the economy’s median wage. In 1988, when autoworker unionization was high, they made 62.5 percent more than the average wage, compared to 7.1 percent now, as autoworker union representation has declined.

The Economic Policy Institute’s report also noted that at black autoworkers have a disproportionately larger share of the auto parts manufacturing workforce, where they represent 16.6 percent of workers, compared with 12.5 percent of workers nationwide.  And in Southern states, where little of the auto manufacturing workforce is unionized, Blacks represent an even larger 18.9 percent of the workforce.

“This strongly suggests that, given the racial composition of the regional economy, the unionized segment of the auto-production sector has done a much better job of making job opportunities available to black workers,” the report said.

Meanwhile, Deese and other speakers said that the U.S. must act swiftly to retool its auto manufacturing capacity to meet the growing worldwide demand for electric vehicles.

“If we’re looking back a decade from now, and we’re exporting this technology around the world, it will be because of an industrial strategy that put workers at the center,” Deese said.

Edited by Matthew B. Hall and Bryan Wilkes