Good luck qualifying for the tax break Joe Biden is touting on that EV he wants you to buy
Just yesterday, Joe Biden's official Twitter account posted that the great American road trip is going to be fully electrified and that citizens can receive a tax credit of up to $7,500 for a new electric vehicle (E.V.).
Along with the message was a photo of Biden driving a GMC Hummer E.V.
On my watch, the great American road trip is going to be fully electrified.— President Biden (@POTUS) January 30, 2023
And now, through a tax credit, you can get up to $7,500 on a new electric vehicle. pic.twitter.com/n3iZ9etL4A
This was part of the Inflation Reduction Act of 2022, which changes rules for an existing tax credit associated with the purchase of "clean" vehicles.
We dig deeper.
Does Biden's Hummer E.V. qualify for the scheme?
The $7,500 credit scheme is applicable to new vans, sport utility vehicles, and pickup trucks that cost $80,000 or less.
The GMC Hummer EV costs between $87,000 and $110,000, so it doesn't qualify for the credits.
Clearly, those running Biden's Twitter account didn't read the criteria on the IRS website.
This isn't the first time Biden has promoted expensive vehicles.
Fox News revealed that during a September Detroit auto show, Biden boarded a Cadillac LYRIQ, an electric SUV with a starting price of over $60,000, and said the following:
The vehicles here give me so many reasons to be optimistic about the future.
Just looking at them and driving them, they just give me a sense of optimism, although I like the speed, too.
We are rebuilding the economy, a clean energy economy, and we're doing it from the bottom-up and the middle-out.
How environmentally friendly is the vehicle in question?
The American Council for an Energy-Efficient Economy reported that Biden's Hummer E.V. "emits more per-mile carbon dioxide pollution when taking into consideration its electricity use than a gas-powered Chevy Malibu sedan."
NPR reported certain issues with the scheme.
Only vehicles that cost less than $55,000, or less than $80,000 for trucks and SUVs, qualify for the tax credit.
The average cost of an E.V. is roughly $66,000, which means few vehicles qualify for the scheme. Some vehicles listed on the IRS website as potentially eligible for credit actually fail to qualify because they are expensive.
Another problem is that there isn't an explicit definition regarding which vehicle is subject to that $55,000 cap and which vehicle is subject to a $80,000 cap.
The IRS states that the categories are based on the criteria for fuel economy for gas-powered vehicles standards, but these classifications seem arbitrary and confusing.
There were other problems with the information on the IRS website.
The plug-in hybrid Ford Escape was listed as having an $80,000 price cap for more than a week before the cap was changed to $55,000. The Treasury Department claims that the original price cap was a typo.
You would have hoped the content on the website was reviewed before publishing.
But then this is the Biden administration. Blundering is its middle name.
There are other issues with the scheme.
The clean vehicle credit is a "non-refundable" tax credit, which means buyers get the full benefit only if they have an annual federal tax liability of at least $7,500, which seems odd.
Some of the tax credit rules took effect on Jan. 1. However, other rules related to battery minerals and other components are expected to take effect by March 2023.
Hence, many vehicles that currently qualify for the tax break may not after the rules take effect.
The scheme has income restrictions, too: a maximum of $300,000 for a household, $150,000 for an individual, or $225,000 for a head of household. The income limit is adjusted gross income (AGI), not the total income. AGI is the gross income minus adjustments to income.
Experts say that these restrictions unnecessarily disqualify a significant potential number of buyers.
Finally, the qualifying E.V. must have undergone final assembly in North America to qualify for the scheme. The claim is that they want to boost U.S. manufacturing.
If that was the case, why didn't they restrict the location of assembly to the U.S. rather than North America, which includes Canada and Mexico?
If foreign players are indeed being allowed, why not allow them all?
Let's go beyond the scheme also look at the practicality of an E.V.
There aren't a sufficient number of E.V. charging stations that are compatible with all vehicles and technologies across the U.S.
The E.V., at best, is suitable as a second vehicle to drive within the city or nearby locations. This will make it an expensive proposition, especially for the income groups that satisfy the criteria for the scheme.
The great American road trip that Biden is touting may hence be out of the question for E.V.s.
Once again, this reveals that it isn't only Biden who is out of touch.
Let's look at the expensive E.V. GMC Hummer Biden promoted.
The Bureau of Labor Statistics revealed that median weekly earnings were $1,085 per week in the fourth quarter of 2022, hence the median American salary is around $56,000 per year. Biden's E.V. costs more than the median salary.
It didn't strike Biden or any of his handlers that this display may be insensitive toward the less fortunate. Yet they claim to be the ones with empathy.
Every aspect of the scheme makes it perfectly obvious that those who conceived the scheme do not know the ground realities. The ever-changing rules further blacken the darkness.
The bigger concern should be about the government promoting products manufactured by a specific sector of private players via this scheme.
The scheme ends up discriminating against manufacturers of gas- or diesel-powered vehicles and their millions of employees. If the government favors one kind of vehicle, the others will suffer, and the suffering will be passed on to employees and, in turn, their families.
This isn't the only case of the government interfering with the market.
ExxonMobil reaped a record $55.7 billion in profit last year as oil prices surged following Russia's invasion of Ukraine. This is how the market works: rare commodities command a higher price.
Yet once again, the White House issued a statement calling it "outrageous that Exxon has posted a new record for Western oil company profits after the American people were forced to pay such high prices at the pump amidst Putin's invasion."
Ukraine and Russia together account for almost 30% of global wheat exports. Wheat prices surged to their highest level in 14 years. That could impact prices for bread, pasta, cereal, baked goods, and other wheat-reliant foods if producers pass higher costs on to consumers.
Yet the White House hasn't condemned any private players here for price surges or profits.
When the government issues a statement attacking one private player, it does have an impact. Perhaps the price of its stock falls, because shareholders think it is a warning that punitive actions may follow.
This is not how free-market capitalism functions.
In a free market, the government has no business being in business or interfering in business. Governments must ensure that each private player has identical opportunities and enforce regulatory mechanisms to ensure that uniformity prevails.
Then they must get out of the way and allow every player to compete in a free and fair manner, which means no favoritism and no discrimination.
Image: Michael Movchin / Felix Müller via Wikimedia Commons, CC BY-SA 3.0.