DENVER — A bill that would repeal state tax subsidies on the purchase of electric vehicles (EVs) and Alternative Fuel Vehicles (AFVs) cleared committee this week on a 4-1 vote.
Senate Bill 18-047 is now headed for appropriations.
It’s the second year Sen. Vicki Marble, (R-Fort Collins), has brought the bill. Last year, it stalled on the Senate floor, never getting a second reading. It is sponsored in the House by Rep. Lori Saine, (R-Dacono).
If it gets out of the Senate this year, it’s unlikely to pass the House.
Currently those with EV or 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 get $5,000, which, unlike most states and the federal credit, can be used as a rebate, and trucks get $7,000- $20,000.
Money saved by the repeal would go toward the highway users tax fund. Legislative Services estimates the impact on the budget would be about $50 million in additional revenue through 2021, when the tax credit is set to expire.
Marble said the main difference this year is the bill doesn’t take effect until the 2019 fiscal year to give those impacted by the change time to prepare.
Colorado has the most generous tax break of all states who offer a similar incentive. Many states have ended the program, most did not exceed $2,500, many lowered the credit on higher priced vehicles like the Tesla, and most capped the total program amount either by amount disbursed or vehicles purchased. Colorado does none of those.
The federal tax credit is for up to $7,500 and is a non-refundable credit, so it will only go toward outstanding taxes owed and unused credit. So a consumer in Colorado could get up to $12,500 in credits and rebates.
Those in favor of the repeal argue the incentive only helps people who don’t really need it, saying that most EV buyers are higher-income and could purchase the vehicles without the subsidy.
According to Fleetcarma, a cleantech information and communications technology company with a mission to “help accelerate the adoptoin of EV’s and strive to make the ownership experience better,” the cheapest electric model available today is the Ford C-max Energi, with a base price of $27,995.
Applying the $5,000 Colorado rebate, after taxes, and at 3 percent over five years, the payment on the C-Max Energi is about $450 per month. Fleetcarma lists just four models below $30,000, with most between $45,000-$65,000 and several near $100,000.
Brandon Wark, representing Advancing Colorado, a non-profit organization focused on free-markets, individual freedom and liberty, said the credit is nothing more than a government subsidy.
“Ending government subsidies on electric vehicles would restore market prices and allow consumers to make better buying decisions,” Wark said during committee testimony. “Anytime a government entity manipulates a pricing system, the market becomes distorted. Prices are skewed and both consumers and producers are unable to know the real cost of their product. Our state government is giving electric vehicles an unfair market advantage. Electric vehicles have been given this advantage in order to entice Coloradans to purchase these products because it is cost prohibited for many to purchase an electric vehicle at the market price.”
Wark said evidence from other states shows that the only reason these vehicles are being purchased is because of the credit, citing a drop in Georgia sales by more than 90 percent after its tax incentive was discontinued in 2015.
“It is likely that the electric vehicle market is being propped up only by electric vehicle subsidies,” Wark said. “This is only another form of corporate welfare.
Those opposed say it would hurt the industry, which has planned on the credits to subsidize their industries through 2021.
Scott Hutchins, who spoke on behalf of Waste Management, spoke against the bill for the second year.
“It is important to us as we convert our fleet,” Hutchins said. “We have committed to converting out entire fleet. We count on these incentives as we move forward.”
Hutchins said he has to compete with other states within the company for the newer Compressed Natural Gas trucks, and unless he can show he has a competitive price in Colorado, he won’t get the trucks, so the conversion will take longer.
“We can do that with these incentives,” he said. “We think it’s something that is important, especially when you are sitting in an EPA non-attainment zone.”
An EPA non-attainment zone is an area considered to have air quality worse than the National Ambient Air Quality Standards as defined in the Clean Air Act Amendments of 1970.
“Converting a trash truck is like pulling many, many cars off the road, that is why we are here asking you to not pass the bill,” Hutchins said.
Last year, Hutchins compared one trash trucks’ emissions is the equivalent to 300 cars.
Sen. Tim Neville, R-El Paso, asked if conversion made sense for Waste Management even without the incentive.
Hutchins said yes but said the recovery rate for the cost of the vehicle is longer without the credit.
“One of the reasons we went to this conversion was because the trucks are paid off quickly,” Hutchins said adding payback with the subsidy the payback of a truck is 3-5 years. Without the subsidy payback is 5-7 years. The average life of a trash truck is 10-11 years, Hutchins said.
Linda Haithcox Taylor, however, said legislators need to pay attention to all their constituents not just the few who can afford to buy the car.
“Use of state dollars should not be for those who do not need those subsidies,” Taylor said. “I was a single mom, and there were times I had to choose between paying the electric bill and buying food. So the thought that there is a tax credit somewhere to pay for their beautiful new car when possibly a child may need healthcare, a veteran may need resources, an elder person may need housing, that really concerns me.”
Taylor is the executive director of the Washington D.C.-based National Policy Alliance, an organization representing more than 10,000 African American elected officials and more than 3 million African American government employees from federal, state and local levels of government throughout the country. She came to Colorado as a guest of the Independence Institute.*
However, Jeff Seaman, representing the Alliance of Automobile Manufacturers said rigorous federal mandates on fuel efficiency standards for the companies he represents — BMW, Fiat, Chrysler, Ford, General Motors, Jaguar, Land Rover, Mazda, Mercedes Benz, Mitsubishi, Porche, Toyota, VW and Volvo — would be hard to meet without Colorado’s tax credit.
“They are being required to meet a corporate fleet average of 54.5 miles per gallon by the year 2025,” he said “In order to get there or get close they need to move advanced technology into the market place. These sorts of credit programs help with the uptake in the market place on these kinds of vehicles that are largely unknown to consumers the credits are due to expire in 2021 a lot of my companies have made business decisions based on these credits and would oppose the premature elimination of them.”
Taylor said the transition to new technology has happened many times in history and auto manufacturers made it through.
“The horse and buggy people probably didn’t like Mr. Ford very well either,” Taylor said. “But I’m sure no one got tax credits for having an engine versus a horse and buggy. I am sure that in the 1970s and 1980s when carburetors had to be adjusted and exhaust systems changed, no one received tax credits then either.”
*Complete Colorado is a project of the Independence Institute.