President Joe Biden promised that US consumers would receive EV tax credits for electric automobiles made in America. But it has been revealed that the Democrats’ landmark Inflation Reduction Act will also ship taxpayer dollars to foreign manufacturers. The Don’t Say Inflation legislation has only just been signed into law, and it has already turned into a boondoggle that, according to various estimates, will not address inflation, the federal deficit, or economic growth.
EV Tax Credits for Foreigners
The bill provides consumers with a tax credit of up to $7,500 to purchase new or used electric vehicles. It was publicized that this benefit would apply only if the cars are produced domestically. “American auto companies, along with American labor, are committing their treasure and their talent, billions of dollars to make electric vehicles and battery and electric charging stations all across America — made in America, all of it made in America,” Biden stated.
But, in the words of the president, here’s the deal. Any “Buy American” eligibility requirements are omitted from the legislation. Instead, the left’s agenda consists of credits that can be utilized for electric automobiles that are sourced and manufactured in North America. Put simply, Canadian and Mexican EVs can qualify for US tax credits.
“This is an important development,” Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association (CVMA), told the Financial Post. “They broadened out the applicability of it. It’s all based now on North American assembly … this is important because Canada has a completely integrated automotive industry with the U.S.”
Flavio Volpe, the president of Canada’s Automotive Parts Manufacturers’ Association, was also ebullient over the news, noting in a statement that the tax credit exclusive to US electric vehicles was the “largest single threat” to Canadian automakers.
In recent years, more companies have shut down US auto plants and relocated these operations, including in the electric vehicle department, to Mexico. General Motors (GM), the largest American automaker, invested $1 billion in its fifth plant to construct EVs in Mexico. It is estimated that companies can save up to $1,500 per vehicle on parts production and approximately $600 on labor costs for each automobile by operating south of the border.
Blunders in the Making
The Inflation Reduction Act’s green economy aspect has resulted in regulatory challenges for electric vehicle buyers. The most notable development was that when Biden signed the legislation, it effectively canceled the old EV tax credit for the rest of the year. This means that motorists will not be able to get their hands on the $7,500 tax credit until 2023, mainly because the bill contains a variety of rules, such as battery sourcing, critical minerals, domestic-content benchmarks, and car assembly. Suffice it to say, there are no retroactive applications for EV buyers for the rest of the year.
The next key ramification of the Democrats’ plan is that it reduces the number of automobiles that are eligible for the tax credit. In fact, according to Alliance for Automotive Innovation CEO John Bozzella, roughly 70% of EVs presently sold in the US will no longer be eligible for the overhauled tax credit. This, industry experts aver, will lead to Washington falling short of its 50% EV sales by 2030.
Plus, to no one’s surprise, the Inflation Reduction Act has caused an unintended consequence for retail costs. Ford announced that it would raise the purchasing price for its electric vehicles by between $6,000 and $8,500. The F-150 Lightning Pro will sell for $46,974, up $7,000 from last year. GM confirmed comparable price hikes.
Don’t Say Inflation
Tax credits are welcomed relief that eases the confiscatory might of the Leviathan. Despite the federal government extracting thousands of dollars from taxpayers’ pockets every year, bureaucrats and politicians offer some respite from, as former President Calvin Coolidge would put it, the legalized larceny that occurs every day ending in “y.” Unfortunately, the tax credit is too good to be true.
The first problem is that it acts as a nudge, extending the power to officials to push the public in a certain direction the statists approve. In this case, the government wants the people to buy electric cars. The tax credit has metastasized into a form of social engineering. The second issue is that tax credits do not resolve the inflation challenge, mainly because they contribute to what caused the cost-of-living crisis in the first place: too many dollars chasing too few goods.
Any time the state gives the citizenry back a little bit of their money, it is essential to question its motive. Today, it is easy to understand the why: to satisfy the desires and needs of the green fetishists.