The State Of Georgia Reverts To The Mean On Electric Vehicle Tax Incentives

"Joe6pack" (joe6pack) 03/09/2015 at 11:00 • Filed to: None

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It looks like the good ol' boys down at the capitol are going to prevail in their quest to kill the most generous tax incentive for electric vehicles in the nation.

I have been working on an article about living with an EV as an everyday driver. I've been on it for about a week and frankly, it sucks. I keep getting stuck on the discussion of how I was able to justify the car based on low acquisition costs thanks to federal and state tax subsidies and the low operating costs thanks to it being an EV. This discussion involves spreadsheets, the operating costs of my old daily driver, the price of electricity and blah, blah, blah. Boooorrrinnng. I still plan on doing a couple of articles on the positives and negatives of living with an EV as I think that would be interesting. But, rather than suffer you with my specific situation, I thought I would instead discuss the use of tax subsidies as they relate to EVs.

What prompted this change of direction is that last Thursday, the Georgia House of Representatives voted to do away with the $5,000 state income tax credit for purchasing or leasing an EV. Georgia has had one of the most generous tax subsidies for EVs in the country which explains why Atlanta is the number one market for the Nissan Leaf in the U.S. The elimination of the tax credit was part of a larger piece of legislation designed to raise additional funds for transportation infrastructure. In addition to doing away with the tax credit, the legislation also raises the gas tax to 29 cents per gallon and slaps a $200 per year fee onto EVs ostensibly to collect the motor fuel taxes that EVs don't pay because they don't use gas. While this legislation is not a done deal (it still has to be voted on by the Senate and signed by the Governor), all signs point to it becoming law.

This was a very generous tax credit, not a tax deduction meaning that if you were to owe $5,000 in taxes for the year, your tax liability would be reduced to $0 and you would receive a full refund. Not only that, you had up to 5 years to use the credit. So if you only owed $3,000 the first year, you could carry over the remaining credit into the next year and so on. The one catch is that you actually have to have a tax liability in order to qualify for the credit. This is what is known as a first world problem.

Disclaimer: I took full advantage of both the federal and state tax credits when leasing my 2012 Nissan Leaf.

Now in principal, I am opposed to subsidies or the government attempting to "pick winners and losers" as it were. But with that said, there are some society-wide advantages to electric vehicles that one has to consider. See below:

Less Dependence on Foreign Oil – Now I don't want to turn this into a political discussion. That is not my intention. However, we all know that the people we buy oil from in the Middle East generally don't like us. And we have wasted a lot of time, energy and young lives dealing with these idiots. So anything that lessens oil consumption from foreign sources is a good thing.

Lower Prices at the Pump for Everyone – Because alternative fuel vehicles don't use gasoline, it means there is less demand which leads to lower prices. Based on the 18 mpg that my old Jeep got and the 27,000 electric miles I have driven so far, I have forgone the use of 1,500 gallons of fuel (you're welcome).

Better for the Environment – Ok, again, not political. I don't necessarily believe that man-made climate change is real or that the "science is settled". However, I also don't know it not to be true. What I do know is that if I start up my Porsche in the garage with the door shut, it will eventually kill me. My Leaf on the other hand could sit in my 4 year old daughter's room running all night and she wouldn't even know it was there. Well, she might notice the giant white orb with the flashing blue lights, but you get my point.

Most EVs Charge at Night – I don't know how much you know about electricity production or infrastructure, but think about this: Electricity demand usually hits its peak around 4:00 in the afternoon during the summer. Therefore, the power company has to build enough capacity to keep up with this peak demand. However, at night when things cool off or during the winter, demand drops significantly. Now, all of that additional capacity is idle. It may sound crazy, but EVs charging at night help to level demand. This is a good thing because it means that the power company can recoup some of the investment it has to make to deal with peak demand. That's why the power companies are actually encouraging EV adoption. My Leaf is programmed to be fully charged by 6:30 a.m. every morning.

Georgia Doesn't Produce or Refine Oil – According to the Union of Concerned Scientists:

"......the money that EV drivers spend on fuel goes to power companies that employ Georgians, pay local taxes, and have a stake in the state economy. In contrast, a majority of the money drivers spend to fill up conventional vehicles pays for crude oil, which is extracted and refined outside Georgia. For every dollar spent on gasoline in the United States in the past five years, 71 cents went to extracting and refining crude oil, while less than a dime went to the local gas station."

In fact 30% of Georgia's electricity comes from nuclear.

EVs Save Money - In my case, when gas was $3.50 a gallon, I calculated that going electric saved me roughly $137/month in fueling costs ($38/month vs $175/month). Imagine reducing your fueling costs by 78%. That's money that could be spent in other areas of the economy. Win!

In Order to Get the Credit, You Actually Have to Buy the Product – Unlike with Solyndra, et al, the primary beneficiaries of these credits are tax payers. Yes, the manufacturers benefit indirectly, but it costs money to own and drive an EV and it still has to function as a car.

And finally,

We Don't Look Like A Bunch of Unsophisticated Rednecks - It seemed for once, the state that I have called home my entire life was actually looked upon in a positive light by the rest of the country. Articles were being written about how Georgia was leading the nation in EV adoption rather than the things in which we usually lead the nation like unemployment, underwater mortgages, teen pregnancy, poverty and crooked politicians.

Now, do all of these good things equal $7,500 in federal tax credits and $5,000 in state credits? I don't know. But in our zest to rid the tax code of these types of subsidies let's not lose sight of some of the positives.

Now it's your turn. What do you think of these types of tax incentives in light of the above discussion? Are they fair? Are they worth it?

thebigbossyboss > Joe6pack 03/09/2015 at 11:18

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Full disclosure: I live in another country. But I do not believe that these tax credits are to the benefit of society writ large. I don't begrudge you for taking advantage of it (because if I was you I would totally have done so except I don't want an electric car because I can't fix those) but since people buying fancy new hybrids like the leaf or telsa tend to be better off, it really is a transfer from the poor to the rich. The poor tend to drive 14 year old economy cars.

I have always though fuel taxes are a good way to raise the required money for roads since it is user pay but electric vehicles do leave a hole in this gap that has to be remedied "somehow" especially as more and more are on the roads so the $200 per year fee is not that insane. Here in Ontario all cars pay a $90 per year fee and then on gas of course there is 10 cent a litre (almost 1/3rd gallon) federal excise tax, the 14.7 cents a litre provincial fuel tax and then once those taxes are included, you pay GST of 13% on and those previous taxes are included in the tax calculation, so for every dollar of gas you pay for you are paying approximately 3.12 cents which is ONLY sales tax on other taxes. It really is quite infuriating.

Lastly. "we all know that the people we buy oil from in the Middle East generally don't like us." This may be true, but the largest importer of oil into America is my happy home right here in Canada, and don't worry we like you guys a lot. Just maybe not your President so much. (Dear Obama please approve Keystone XL) anyways that's what i got say on the matter! Good article, well written.

Would probably not examine EV cost ownership spreadsheets lol.

Funktheduck > Joe6pack 03/09/2015 at 11:18

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Hey another GA Oppo.

I'm pissed about this new legislation. Write your senator. Get everyone you know to email or call them. I plan on it.

I don't disagree that the gas tax should be raised. I'd rather pay more than have spaghetti junction collapse. But, an automatic yearly hike is not ok. If they want/need to raise/lower taxes then they should be held accountable for raising/lowering them by voting on each individual raise/decrease.

Twingo Tamer - About to descend into project car hell. > Joe6pack 03/09/2015 at 11:23

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I personally dont believe EVs are the answer so this doesn't bother me too much. It seems to me that if we can get hydrogen to pumps more efficiently than we do now, fuel cell vehicles are the way forward.

The incentives always seemed a little high when (depending on how your region generates power) the reduction in emissions was questionable.

wiffleballtony > Joe6pack 03/09/2015 at 11:39

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Personally, I don't believe the government should be subsidizing commercial goods. They should stand on their own merits or not at all.

Texican > Joe6pack 03/09/2015 at 11:50

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From the state's perspective, the subsidies just aren't sustainable. EVs already bypass the gas tax, which for better or worse, is how we pay for roads. Heaping a subsidy on top really hits to coffers. The point was to get a critical mass of electrics out there so that the charging infrastructure can develop. Now that that is happening, the long term funding issues gain importance.

jariten1781 > Joe6pack 03/09/2015 at 11:56

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Not familiar with the whole bill so I'm sure there's massive baggage, but the lowering of the subsidy in a vacuum seems appropriate. The point was to get people to take a chance on an unproven technology. They did in large numbers hence the highest take rate. Now that the vehicles are out there with ambassadors it makes sense that they can live or die on their inherent weaknesses/benefits (which you've begun to enumerate).

nermal > Joe6pack 03/09/2015 at 12:08

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I live in PA, our EV rebate is $2,000, but only on purchases. Combine that with the $7,500 federal incentive, and it seems like a good deal.

As far as total cost of ownership is concerned, if your lifestyle fits within the operating parameters of an EV, it is absolutely the most economical transportation solution. So, somebody that commutes < 25 miles per day and has access to a 2nd vehicle for longer trips. This will apply to a Leaf / i3 / Focus / Golf / Fiat EV. Teslas don't apply here, people don't spend $80-$100k on them to save money.

I think GA did it right, based on results. In PA at least, so far only about 300 people have taken advantage of the $2,000 credit, and most of them are probably Teslas anyways. It would be preferrable if both the state and federal credits applied to a lease, and could be taken off of the purchase cose up front. How much more appealing would that make things?

nermal > Texican 03/09/2015 at 12:10

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Yep. It was a jump start incentive, with the hopes that it would pay dividends long-term. Seems to be going well so far, time will tell though how good of an idea it was.

Joe6pack > thebigbossyboss 03/09/2015 at 23:01

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Sorry so late responding. Curse (blessing?) of a day job and a family.

I work in transportation and actually work for the government. I stand to benefit from more revenue in the system as it will likely trickle down to us locals. However, I think the days of the fuel tax are numbered. With gas mileage increasing it makes more sense to go to a usage tax based on miles driven, vehicle weight, number of axles, etc.

I actually support the Keystone XL. If someone wants to come invest in your country, why would you say no. I think the environmental fears are overblown. And besides, that oil is going to be transported anyway. It'll just be by rail and we have already seen what that can do.

Ok, my favorite joke about Canada: You know, Canada could have had British Culture, French Cuisine and American engineering. Instead they got, French Culture, British engineering and American Cuisine. Tongue in cheek of course. :^)

Joe6pack > nermal 03/09/2015 at 23:02

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I admit our take rate caught everyone off guard. This subsidy was actually put in place 16 years ago when there were no viable electric cars. My theory is that it was passed so that fat cats could get road legal electric golf carts for free.

Joe6pack > Funktheduck 03/09/2015 at 23:03

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My representative actually voted against it, but mainly because of the tax increases. It will be interesting to see what it does in the senate.

Joe6pack > jariten1781 03/09/2015 at 23:05

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Really can't disagree. When I got my Leaf, I was the only one on the road. I must pass 5 or 6 on my way home, now. The salesman even said I was going to be unicorn. As much of a petrolhead as I am, I really do believe this is the future.

Joe6pack > Twingo Tamer - About to descend into project car hell. 03/09/2015 at 23:13

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Actually, 95% of hydrogen production comes from natural gas reforming. So, it is still based on fossil fuels. What would really be great is if you could decentralize the process and actually produce the hydrogen at home (assuming your home has natural gas service). Another major concern is that it is highly flammable - think Hindenburg.

Still, I think electric is actually the future. Electric cars are maddeningly simple and the only real shortcomings are range and charge time. And we are getting there with both. Remember we are on Leaf 1.0, Tesla 1.0, etc.

Joe6pack > wiffleballtony 03/09/2015 at 23:18

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True, but the government is always in the game. Think about this, you pay gas taxes to build roads that are then used by fuel companies to transport fuel to filling stations day in and day out. Isn't that a subsidy. Yes, there is a tax on diesel, but is it enough? Don't know.

wiffleballtony > Joe6pack 03/09/2015 at 23:34

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No, not really a subsidy and a tax are pretty much diametrically opposed. The subsidy on EVs is to encourage people to purchase vehicles. The gas tax is used to fund the maintenance of the road network (and other things that have no relation to transportation), if anything the gas tax is a deterrent, not a subsidy. I have a few problems with that. Why does the government get to determine what we "need?" Ostensibly if we all hopped on board the EV train then we'd all be screwed. I would rather the government take the EV rebate money and put it toward funding clean power stations to replace the coal and oil etc. However that isn't nearly as feel good and instant gratification for the voters and politicians. Its easier to feel green with an EV in your driveway than a nuke plant that you don't think about.

thebigbossyboss > Joe6pack 03/10/2015 at 07:39

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This is true that the gas mileage is steadily eroding the value of the fuel tax. There was another 'mobile pipleline' (aka train) derailment here this year, there was been quite a few recently including an accident a few years ago where most of a town burned down.

See, now if Canada had gotten British cuisine, then we would really be suffering. :P

If we are telling neighbourly jokes....you may say that Canada is America's hat, but we think America is Canada's pants!