Almost since the beginning of the modern hybrid and electric vehicle movement, the United States government has offered tax incentives for drivers who were willing to take a risk on—and usually pay a premium for—a new automotive technology. In 2002, two years after the Toyota Prius first hit dealer lots in the US and four years before Tesla would show off a 250-mile EV, the federal government launched its first incentives for the purchase of new hybrid vehicles.
Tax credits for hybrid, plug-in hybrid, and electric vehicles have been a fixture of the American car buying experience ever since, and research shows they’ve been effective at encouraging the adoption of EVs and hybrids in the United States.
But with EVs serving as one of the many shibboleths in a terminally partisan culture, is the EV tax credit at stake in the coming November election? Considering that the current iteration of the EV tax credit has already been the subject of repeal threats from both sitting members of Congress and presidential hopefuls, that may well be the case.
EV Tax Credits Are Key To Biden's Green Goals
Automakers and certain regulators are indeed finding ways to "future-proof" any major changes to what's trending to be a mostly electric future.
Recently, Stellantis signed a pact with several other automakers to follow California's stricter emissions rules, and new EV and battery factories in the Red State south—which are bringing tens of thousands of new manufacturing jobs—are unlikely to go anywhere.
But the EV tax credits themselves may be another story.
The current iteration of the EV tax credit is one of the jewels of President Joe Biden’s crowning legislative achievement, the Inflation Reduction Act (IRA). When it became law in 2022, the IRA revamped what had previously been a fairly straightforward tax credit of up to $7,500 for the purchase of a new EV, though manufacturers “ran out” after selling a certain amount of them. The new system progressively limited eligibility for the full credit depending on the origin of battery components and minerals, among other factors.
But it became immediately controversial on the other side of the aisle. For example, freshman Ohio senator J.D. Vance introduced a bill last September that would repeal the IRA’s EV tax credits and establish a $2,500 credit for the purchase of new vehicles manufactured in the United States. In November, now-former Republican presidential candidate Nikki Haley indicated a plan to repeal all of the IRA’s green energy incentives, the EV credit among them. And the mineral-specific rules have been a repeated target of Sen. Joe Manchin, the conservative-leaning West Virginia Democrat who’s retiring from Congress but whose swing-vote power had a tremendous impact on the IRA.
By far the most high-profile critic of pro-EV policies, however, has been former President Donald Trump, who now has the Republican nomination locked up.
Trump has repeatedly suggested that he would seek to repeal tax incentives for EVs in a second term. He has also said that EVs “don’t go far” and are “too expensive,” that EV incentives are “a hit job” on the Rust Belt’s manufacturing economy and that investing in them will somehow leave America in thrall to China.
With months to go before the polls open, votes can still be influenced by countless factors large and small including, perhaps, an interest in preserving access to EV tax credits. But from today’s vantage point, it seems at least plausible that at least one of the major seats of federal legislative power could change hands. Depending on which way the vote swings and how much, the seats of power could soon be filled by people who are ready and willing to end tax incentives for electric or alternative fuel vehicles.
If Biden is re-elected, all signs point to continued investment in EV infrastructure and at least four more years for the IRA’s EV tax incentives, which are currently set to sunset in 2032. If both houses of Congress and the presidency are controlled by Republicans next January, the party could look to unwind President Biden’s legislative agenda.
But Mike Murphy, a GOP political consultant and founder of the EV Politics Project, says that even then, repeal of the Biden administration’s EV policies is not a mortal lock. “You hear a lot of rhetoric” about repealing EV tax credits and manufacturing incentives, Murphy said, “but whether the votes are really there? It’s easier to say it on the campaign trail than to get it done.”
Murphy would expect pushback from the business community and from governors whose states have seen investments in EV and battery manufacturing, including key battleground states such as Georgia, Ohio, and Tennessee.
If a Trump presidency coincides with a Democrat-majority congress, the executive branch could still hack away at the EV tax credits by using the federal rule-making process to change how and where the credits can be applied, though Albert Gore, executive director of the Zero Emissions Transportation Association, notes that any such changes would be subject to legal challenge.
Gore also says that the current implementation and rulemaking around these tax credits was “done with that in mind—that everything needs to be iron-clad and defensible, because we want these policies to be durable.”
Why Repeal?
EV tax credits have certainly been durable so far. They have persisted and evolved over the course of the last two decades, and there are policy arguments in favor on both sides of the political aisle.
The original 2002 tax credit for new hybrid vehicles was born during the George W. Bush administration and was designed, at least in part, to encourage people to purchase fuel-efficient vehicles at a time when the United States was recovering from what turned out to be the first pangs of a major energy crisis—not to mention, a post-9/11 renewed interest in American energy independence. They survived into the Obama years, but most of the tax credits expired after a certain number of vehicles were sold, so automakers like Tesla and General Motors ran out eventually.
The current EV tax credits were designed to incentivize domestic manufacturing and reduce America’s dependence on energy from prickly trade partners including China and Russia. Leaders from both major political parties have historically backed policies that encourage energy independence, including drilling for domestic oil, subsidizing renewable energy, and encouraging individuals and businesses to reduce their emissions.
Electric vehicles are also key to automakers’ abilities to meet rising corporate average fuel economy standards, and crucial to reducing carbon emissions long-term. That’s where things start to turn contentious for EVs and, by extension, EV tax credits. Climate change and the attempts to mitigate it have become partisan issues for many in the United States. A Pew Research Center report released last summer found that 78 percent of Democrats consider climate change a major threat, compared to only 23 percent of Republicans. A 2023 Gallup survey found a less extreme but still pronounced party split on EVs, with 54% of Democrats saying they were actively considering purchasing an EV while more than 70% of surveyed Republicans said they never would.
Research has shown that EV ownership is a kind of conspicuous consumption—or as critics might call it, “virtue signaling”—for Democrats, who may feel more social or self-imposed pressure to reduce their personal emissions in a visible way. But the same messaging that tells Democrats that buying an EV is a good thing for the climate may be driving would-be Republican buyers away. Murphy says that the focus on EVs’ impact on the environment, which remains a partisan issue in the US, means that owning an EV is perceived as a political statement, that "polarizes a significant part of the market” away from EV ownership.
Location demographics may play a role, too, as Democrats tend to be concentrated in cities (where car trips are shorter and less frequent) while Republican voters are more likely to live in rural areas where EV infrastructure is less available. Murphy thinks those motives could change with more new offerings like the 2025 Ram 1500 Ramcharger, which will come with a range-extender gas engine to complement its electric battery.
What Happened Last Time?
For those of us who are paying close attention to the tax credit, history may offer clues to its fate.
In 2017, a Republican plan to overhaul the federal tax code proposed an end to the $7,500 tax credit. The tax plan eventually passed without changes to the incentive. In 2019, then-President Trump proposed a budget that would have eliminated the credit, claiming that doing so would save the federal government $2.5 billion over 10 years. Once again, the credits were safe by the time the budget was passed in August.
During one round of budget negotiations last summer, the Republican majority in the House of Representatives passed a bill that would have repealed certain provisions of the IRA mostly related to renewable energy, though that bill died in the Democrat-majority Senate.
An earlier version of the bill would have repealed even more of the IRA’s spending and incentives, including those for alternative fuel vehicles, but that proposal had been amended by the time votes were cast.
This pattern suggests that while the EV tax credit is a regular target in the federal budget-setting process, it has so far been more a bargaining chip than a sacrificial lamb. Democrats are willing to fight to preserve the credits, while Republicans seem content to let them skate by, even after making a big, public show about ending them.
We Won't Know Until We Know
The fate of the credit will depend not only on who sits in the Oval Office, but on which parties control the House and Senate (and by how much). Anyone predicting who will win those elections today is about as informed as a Magic 8 ball.
The EV tax credit has so far survived with both Republicans and Democrats in the White House, and it was even spared from the chopping block during the period from 2017-2019 when Republicans controlled both houses of Congress and the presidency. But past performance doesn’t guarantee future results, and an increasingly vitriolic partisan environment could put even relatively benign policies in danger of spiteful repeal.
Still, Trump’s own campaign rhetoric points to support for the goals that underpin these tax credits. During a recent speech in Ohio, the former president railed against the loss of American manufacturing jobs to Mexico and China, and said he would put a 100% tariff on Chinese vehicles manufactured abroad during a second term.
ZETA’s Gore says this bipartisan consensus on energy independence is part of what makes the EV tax credits so strong. “There is an emerging understanding that these credits all work together,” he says, referring to policies that encourage American control of “upstream” elements such as mineral and battery manufacturing and the “downstream” consumer-focused EV credits. “It doesn’t really work to try to lop off the one credit that you don’t like, when the upstream credit that you do like depends on this downstream policy.”
Annie White has been writing about the car industry since 2012. A former editor at Car and Driver, she has degrees in political science and climate change and is interested in stories about the path to a more sustainable future.
