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Can Trump yank GM's electric vehicle tax credit?

Trump threatens to cut subsidies for GM
Trump threatens to cut subsidies for GM amid its restructuring plan 02:37

On Tuesday, President Donald Trump vented his anger at General Motors after the company announced several plant closings and more than 14,000 layoffs. The president threatened to eliminate tax credits for GM's electric vehicles along with other tax breaks and subsidies.

"The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including ... for electric cars," Trump tweeted.

However, taking away that credit, which is phasing out for GM models anyway, may prove difficult for Mr. Trump.

Consumers get the EV credit, not automakers

Congress first put the credits in place in 2005 for hybrid vehicles as a way to stoke consumer demand for lower-emission autos. The legislation was expanded in 2007, allowing consumers who buy an electric vehicle to claim up to $7,500 in federal tax credits on their tax returns. The goal is to lower EVs' higher costs while the technology is still nascent and give it time to become more established.

But the law stipulates that the credit begins to phase out after an automaker sells a total of 200,000 eligible EVs, like GM's Chevy Volt, built near a factory in Detroit. GM is expected to hit that 200,000-unit limit at near the end of this year, which triggers the process of diminishing the credit until it's phased out completely. Tesla already hit that figure.

It's in Congress' hands

Here's another problem for Mr. Trump: Any change in the EV credit would have to originate with Congress, which authorizes spending. Republican Sen. Dean Heller of Nevada recently filed a bill that would lift the automaker's 200,000-unit cap, but it also phases out the credit industrywide in 2022. The right-leaning Tax Foundation noted last month that two other bills also address the issue.

Higher-income households benefit most

The EV credit has been criticized for benefiting mostly wealthy drivers. Roughly 79 percent of EV tax credits are claimed by households with adjusted gross annual incomes above $100,000, according to a study from Pacific Research Institute earlier this year. It found that households earning more than $50,000 per year claimed 99 percent of the credits.

About 1 million electric vehicles have been sold in the U.S., or just more than 1 percent of the nation's fleet, E&E News recently reported.

EV credit isn't the only federal help

The tax credit is just one small part of federal aid that has helped automakers including GM. Yesterday, GM noted its own investments in the industry and said it's grateful for federal support, including under President Trump.

"We appreciate the actions this administration has taken on behalf of industry to improve the overall competitiveness of U.S. manufacturing," GM said in the statement.

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