DENVER – Colorado voters may get the chance to tell lawmakers what to do with some of their money if a bill that would end alternative vehicle tax credits continues to make its way through the legislature.
SB17-188, also known as the “Repeal and Repair” bill, cleared its first hurdle in the Senate Finance Committee on a 3-2 party line vote after hearing competing testimony on who the tax credit helps the most and what is clean energy.
The bill, sponsored by Sen. Vicki Marble, who represents Larimer, Weld and Broomfield counties, and supported by the Independence Institute*, would end the credits earlier than originally planned.
The bill would end the electric (EV) credit after 2017 and all other alternative-fuel (AFV) credits after 2019. The credits are currently set to expire in 2021.
The bill would repeal current tax credits, and money saved from the credits would be diverted to the highway users tax fund to help repair Colorado’s roads and bridges.
However, if legislators approve the repeal portion, the repair part would need approval from Colorado voters because Colorado has reached its TABOR revenue cap for the year.
It has an impact on revenue of about $21 million through the year 2021.
Currently those with EV and AFV vehicles receive up to $20,000 in Colorado income tax credits over and above the $7,500 the federal government already grants. The credit is based on size and weight of vehicle. Light passenger vehicles (Teslas, Nissan Leaf ) get $5,000 and trucks get $7- $20,000. State law allows the credits through 2021.
This bill would end the credits for EVs after 2017 and for all other AFVs such as Compressed Natural Gas (CNG) trucks and busses after 2019.
Marble told the committee Tuesday that the two credits combined is a huge tax break for the wealthy, citing data from the Colorado Energy Office.
“Is this really necessary,” Marble said. “Because when you are look at who is the target to sell these electric vehicles to they are actually those earning more than $100,000 annually, having a bachelor’s degree or higher and owning two or more vehicles. Are we really thinking that we need to subsidize this particular category of people?”
Additionally, Marble said taxpayers are already paying for the charging stations, they shouldn’t have to subsidize a vehicle for someone that may be buying it to make a statement.
“We are going to put this to rest,” Marble said. “Because they are pretty much not needed according to the Colorado Energy Office.”
Those who testified against the bill said the state needs five more years of the credits to bridge the gap in number of vehicles that are gas and electric. They said they make a big difference in greenhouse gas contributions.
Dawn Mullally, Director of Air Quality and Transportation for the American Lung Association of Colorado said there are more than one-half million Coloradans living with chronic lung diseases. She said the projected growth of the state and the increasing wild fires causes health-compromising, air pollution in the Denver-metro and Fort Collins areas.
“Transportation is currently the greatest cause of air pollution in the United States,” she said. “We need to do whatever we can to foster less polluting sources of transportation. Whether it’s (Compressed Natural Gas) CNG, electric vehicles, hydrogen-fuel celled, they all have significantly less emission pollution than traditional (gas-powered) vehicles.
However, Mullally said that many people buy the cars for reasons other than the environmental factor.
“The people that I know that have purchased electric vehicles, they do it because it’s a good deal,” she said. “They don’t have a lot of money.”
However, a Los Angeles Times story showed that in May of 2015 those receiving California state rebates had incomes more than $500,000; 28 percent earned between $200,000 and $499,000; and 43 percent earned between $100,000 and $199,000.
Despite California lowering the maximum income level to claim the credits, less than 6 percent of the EV rebates in California go to disadvantaged buyers, said one person who testified on behalf of the bill.
Michael Sandoval, senior energy policy analyst for the Independence Institute*, said the numbers in Colorado are similar, citing Colorado’s Energy Office (CEO).
According to the CEO’s 2015 Electric Vehicle and Infrastructure Readiness Plan, Sandoval said, those earning more than $100,000 annually, having a bachelor’s degree or higher, already owning two or more vehicles, and aged 38–78 years were identified as the key target market for electric vehicle purchases.
Nigel Zied from Boulder Nissan testified that without the tax credits, purchasing an EV is cost prohibitive. He argued that those buying the vehicles were not necessarily wealthy because all EVs were not in the price range of the Tesla, which retails for $75,000 for the low-end base model.
“There is a common misconception that EVs are only for the wealthy,” Zied said. “For sure, the Tesla owners don’t really have to have a federal or state tax credit. The Leaf is the largest selling EV in Colorado. So we can’t clump everyone together.”
According to the Boulder Nissan site, the 2017 Nissan Leaf EV had asking prices between $25,000-$35,000 MSRP. If a car qualified for full state and federal tax credits the final price of the cheapest model would be $12,500. By comparison, a 2017 Nissan Versa Sedan without tax credits sells for $10,700.
“This means Coloradans are subsidizing urban driving habits of wealthy Front Range residents, while critical infrastructure improvements go unfunded,” Sandoval said. “The state shouldn’t be in the business of subsidizing vehicles for consumers — some who are buying their second or third vehicle, but who wouldn’t buy at the current price without significant help from CO taxpayers, working families, and federal subsidies.”
Zied also said that not having to buy gas and low maintenance costs make the EV attractive. However, according to Nissan’s Corporate website, the Lithium Ion battery that powers EVs needs replaced about every 60,000 miles or five years. Cost of new battery can be up to $6,000 or more.
Sandoval testified that the Lithium Ion battery used to power the vehicles are energy intensive to make and waste more energy in the long run than they save.
“When we talk about renewables, somehow magically, solar and wind have no environmental cost, we are ignoring the fact that 83 percent of rare earths that produce the magnets and the batteries that go into renewables … is a very energy intensive and emissions process, and produces lots of toxic waste,” Sandoval told the committee. “In fact, each ton of rare earths produces about 20,000 gallons of toxic water. There are environmental costs to wind and solar.”
Zied said Colorado – with one of the largest tax credits programs in the nation — is very fortunate to have the credit it has and legislators should not roll it back.
“Other states look at us as a shining example of what can be done,” Zied said. “And it took some guts for the people who voted for this. No one likes to spend money on things that seem to be for a privileged few. We have to start somewhere. Why shouldn’t Colorado be the leaders in this?”
Scott Hutchins, who spoke on behalf of Waste Management, said without the credits his company would not be able to replace their fleet with CNG models as quickly.
“When you’re looking at one of the biggest factors to (pollution) are trucks like ours that start and stop, start and stop,” Hutchins said. “In fact, when you convert a trash truck, it’s like pulling 300 cars off the road.”
Hutchins clarified that trucks cannot actually be converted but have to be purchased new at about $330,000 per truck. He said Waste Management has more than 20 million customers and 40,000 employees. It’s Colorado fleet consists of about 300 trucks. With the credits, the private company has been able to add more than 100 new CNG trucks to its fleet, Hutchins said.
Hutchins said CNG trucks can be paid off within three years because of the savings, compared to five years of the older diesel models.
“That is an astronomical rate of pay back,” said Sen. Jack Tate, R-Arapahoe. “That would make me even more suspicious of a subsidy.”
Sandoval pointed out that with 20 million customers, a new truck averages about 2 cents per customer and that Waste Management should spread the cost of new trucks across its customers rather than the taxpayers. At 2 cents per customer, the company could buy 150 new trucks per year for a one-time increase of $3 per customer or a 25-cent per month increase in service cost.
The committee forwarded the bill to appropriations after passing it along party lines.
Sen. Andy Kerr, D-Jefferson County, who voted no on the bill, said he agrees that transportation problems is an issue that needs addressed, but this was not the right way to go about it.
“I have far more constituents who talk to me about clean air and water and also investing in education than just talk to me about transportation,” Kerr said. “They are all very important, but clean air is very important to folks in my district.”
* Complete Colorado is a project of the Independence Institute.