Transportation funding, climate change and the electric car tax incentive … skeptics want to tap the brake

By: Richard S. Davis
12:00 am
December 1, 2014

Gov. Jay Inslee believes electric cars are good for the state and good for the planet. And he’s looking for ways to promote them.

…Inslee wants to extend a sales-tax break for electric vehicles and explore giving them access to carpool lanes…[Also, he] said he wants to install more charging stations and create incentives for builders to include high-speed charging in projects.

House Finance Committee Chairman Reuven Carlyle questions the incentive, as the AP reports.

“I’m not enthusiastic about a subsidy that picks winners and losers and doesn’t help the middle class,” he said.

The story provides the revenue department’s estimate of the cost.

If the break is extended, it would mean a nearly $13 million hit in tax revenues in fiscal year 2016, and $17 million in 2017, according to most recent estimates by the Department of Revenue. That’s based on about 7,150 cars, with 40 percent Nissan Leafs, 18 percent Tesla Model S and others.

Carlyle goes into more detail in a post on his Facebook account.

I’ve asked Governor Jay Inslee for a real business plan that shows the incremental impact of sales tax elimination on electric vehicle sales. If he wants this tax break I respectfully invite him, like all others in Olympia, to propose a specific, off-setting revenue source or spending cuts to pay for it. It’s a huge cost of probably $60M over four years (about what we need for mental health or all-day kindergarten for low income kids) yet the marginal benefit to dramatically increasing sales of electric vehicles is unclear. There is useful social good but there is also real, out-of-pocket cost to this policy…

Unlike other tax policies that generate increased revenue and employment opportunities, this incentive encourages behavior seen a climate-friendly. And, as an editorial in the Herald of Everett (paywall) points out, it’s not clear the the incentive influences behavior.

Those who buy electric cars can have a number of reasons for doing so, including driving past gas stations, a sense of accomplishment for not adding to the carbon dioxide load and the boost to one’s environmental cred.

The state is already encouraging the use of electric vehicles by installing more charging stations along I-5, I-90 and even U.S. 2 and encouraging builders to include charging stations in their projects.

A break in the sales tax certainly adds to the pros, but would its absence keep anyone from buying an electric?

The vehicles, which range in price from $29,000 for the Nissan Leaf to $70,000 and more for the Tesla Model S, are affordable primarily to those who will have little difficulty in paying the full sales tax.

The editorial board says it’s time for the incentive to expire. The Spokesman-Review also raises questions.

Owners of the Model S, the Nissan Leaf and other electric vehicles get free use of Washington’s congested, crumbling highways and bridges. Yet Gov. Jay Inslee is reportedly ready to extend a sales tax exemption for EVs beyond its July 1 expiration date, and there is legislative support from Republicans and Democrats for the idea.

…Two weeks ago, [Inslee’s] Carbon Emissions Reduction Task Force issued a final report that underscores the challenges of drafting a policy that will clean up our air without punishing Washington’s economy.

EVs certainly fit into that picture, but a sales tax holiday for buyers of expensive Teslas does not. Capping the amount of sales tax deduction makes sense.

Given the magnitude of our transportation needs, the EV tax incentive is probably not a big deal. But the debate underscores the many potholes and roadblocks that lawmakers will have to address in the coming session. For a good overview of the national transportation situation, read Cheap Gas, Crumbling Infrastructure Spark Fuel Tax Talk.

Categories: Budget , Categories , Tax Policy , Transportation.
Tags: incentives