It’s make-or-break time for Democrats’ proposed expansion of electric vehicle tax credits as their plan faces both formal scrutiny by the Senate parliamentarian this week and increasing pressure from international trading partners pushing Congress to ditch bonus credits tied to unionized labor.
The Senate Finance Committee released over the weekend text of its portion of the budget reconciliation package, and it included the preferential treatment for electric vehicles made in America by unionized workers.
Finance Chairman Ron Wyden, D-Ore., told reporters last week that he believes those union bonuses — along with the broader overhaul of clean energy tax credits he has championed — will pass muster with the parliamentarian in the “Byrd bath” process expected to move forward this week.
Those reconciliation rules are aimed at excluding policy provisions not rooted in budget considerations, but Wyden said the tax credits should fit under the criteria.
“I feel very strongly that because we're talking about more than $300 billion in what are called tax expenditures — these are tax credits — it is an area I'm confident will clear the Byrd bath requirements,” Wyden said.
The budget reconciliation package would grant up to $7,500 in tax credits for plug-in electric vehicles, but those credits would get a $4,500 boost for cars and trucks assembled at an American plant operating under a union-negotiated collective bargaining agreement.
The provisions were included in the version approved by the House, but they face pushback on a number of fronts — from Sen. Joe Manchin III, D-W.Va., from foreign automakers with nonunionized U.S. operations and from trade officials in other countries.
Manchin even called the union bonuses “un-American.”
The fact that they were retained in the Finance Committee’s text shows that Senate Democrats are pushing forward with them for now despite that opposition.
Key to agenda
Rapidly increasing deployment of electric vehicles represents a key part of Democrats’ climate agenda as they look to reduce greenhouse gas emissions in the transportation sector. That’s why they included billions in the bipartisan infrastructure legislation to build out a national EV charging network.
Including an extra bonus for vehicles made by unionized American facilities could smooth over concerns among the big, traditional U.S. automakers and their Capitol Hill allies as they work through the transition from internal combustion engines to vehicles that come with electrical plugs.
But that approach quickly sparked trade concerns among other countries. Canada, for example, has been pushing hard on the issue and recently sent a letter to leading Senate Democrats and Republicans raising the prospect of an official dispute process under international trade agreements.
“In the coming days, we are preparing to publish a list of U.S. products that may face Canadian tariffs if there is no satisfactory resolution of this issue,” according to the letter. “While including the auto sector, our proposed retaliatory actions will extend across a number of sectors. At the same time, we intend to make clear which U.S. businesses and workers will be impacted.”
That letter was cited in a statement by Jennifer Safavian, CEO of Autos Drive America, a trade association representing international automakers such as Honda, BMW, Toyota, Mercedes-Benz, Hyundai and others.
“Strong international trade agreements are critical to the success of the U.S. auto industry and have been key to the expansion and growth of the auto sector in North America,” Safavian said. “The Senate must remove the discriminatory tax credit proposal around electric vehicles and provide a level playing field for all electric vehicles and all autoworkers.”
Tesla CEO Elon Musk also reiterated more general criticisms of the EV tax credits during a recent Wall Street Journal interview.
Tesla benefitted from EV tax credits in the past, but Musk said the company stopped getting the tax credits two years ago because they had bumped up against per-manufacturer caps. He also was asked about Democrats securing those billions of dollars for electric vehicle charging stations.
“Unnecessary. Do we need support for gas stations? We don’t,” Musk said. “So there’s no need for this, for support for a charging network. I would delete it. Delete.”
But supporters of the tax credits, and the union bonuses, continue to make the case.
Sen. Debbie Stabenow, D-Mich., was asked earlier this month about Manchin’s “un-American” statements.
“There's nothing more American than workers being able to collectively bargain and join a union for the best wages and benefits and safe working conditions that they can receive,” Stabenow said.