At one point, Colorado’s generous subsidy for electric vehicle sales probably made sense; back then, the technology was in its infancy and couldn’t compete on cost or performance. There was a compelling public interest — protecting our environment and climate for generations to come — for our governments to foster cleaner energy technologies with taxpayer dollars.
However, the time for this credit has come and gone, especially at the state level.
Colorado lawmakers should repeal a tax credit for those who buy electric vehicles and save an estimated $50.4 million over the next three years.
Sen. Vickie Marble and Rep. Lori Saine are right to target this tax credit for repeal in Senate Bill 47. The bill passed the Republican-controlled Senate and is now headed to the Democratic-controlled House, where the odds don’t look good for passage.
The good news is that this tax credit is set to begin ratcheting down in 2020 and will expire altogether at the end of 2021, even if SB 47 fails. But we agree with Marble and Saine that, given existing market conditions, it’s past time for full repeal.
Colorado offers tax credits for a variety of different cars, not just electric vehicles. SB 47 would also strip tax credits for technologies that include compressed natural gas, liquefied natural gas, liquefied petroleum gas or hydrogen. Lawmakers could consider an amendment to protect those technologies, but they hardly have much presence in the present market. At any rate, our focus here is on exempting the more popular EVs.
Until 2020, those who purchase a passenger vehicle using one of those technologies can receive a $5,000 tax credit, but what happens most often is the car dealer offers the discount up front, handles the paperwork and receives the tax credit on the buyer’s behalf.
Additionally, buyers qualify for a $7,500 federal tax credit available for electric vehicles. There have been many voices at the federal level saying that subsidy has run its course as well.
Much of the change of heart is driven by the increasing performance of electric vehicles coupled with their declining costs. Today, the Chevrolet Volt starts at about $37,000 and can go 53 miles on a single charge. The Tesla Model 3 starts at about $35,000 and can go more than 200 miles before needing a charge.
The Denver Post’s Brian Eason reported last month that Volvo plans to drop out of the gasoline-powered market entirely as soon as next year, and Bloomberg New Energy Finance found “electric cars could be as cheap as their traditional counterparts by 2025.”
We are certain the tax revenue can find a good home in Colorado’s budget. Saine and Marble want to send all the money to the state’s fund for transportation needs, which is an appropriate redirection given that electric vehicle owners are contributing far less to our infrastructure funding by avoiding both the federal and state fuel taxes.
We could also see that money going to help fund Gov. John Hickenlooper’s Electric Vehicle Plan, which includes building hundreds of fast-charging stations to contribute to a nation-wide network.
Good public policy calls for us to support Senate Bill 47 and we hope Democrats in the House will do the same.
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