Lawmakers Propose An EV Tax-Cut Benefiting US Unionized Manufacturers

Late last week, Democrats in Washington proposed a new EV tax credit bill that would benefit major US automakers like Ford, Chevrolet, and Stellantis. The tax credit would be specifically for fully electric vehicles that are union-made and assembled in the US. Some automakers have spoken out against this tax credit in the past, saying that it cut benefits for workers who had chosen not to unionize.

The Biden administration has a clearly stated goal of eliminating combustion-engine vehicles and replacing them with fully electric vehicles. Biden and his administration want at least 50 percent of all vehicles sold in the US to be electric by the year 2030. Democrats see the new tax credit as a way to boost union jobs.

Typically, the big three US automakers operate in states where union labor is normal. However, other automakers such as Honda and Toyota typically operate in non-unionized states, and their vehicles wouldn't be eligible for the proposed tax credit. The tax credit is significant at up to $12,500 per US-made vehicle built using union labor.

The tax credit would continue to be $7500 for other electric vehicles. Interestingly, if the bill is approved, it would eliminate the phaseout of tax credits for automakers after they hit the milestone of 200,000 electric vehicles sold. That's particularly important as Tesla, far and away the most popular electric vehicle maker in the US, would again be eligible for $7500 tax incentives on its vehicles.

The bill would also put a $2500 tax credit on the purchase of a used electric vehicle. A $12,500 tax credit on union-made and US-built electric vehicles is massive and could chop as much as one-third off the price of a vehicle like the Chevrolet Bolt. Assuming Chevrolet can sort out its battery problems and begin production again.