Saturday, November 4, 2017

The Electric Vehicle Tax Credit vs. Unstable Government

In recent years, the Republican Party, as a body, has been trying to convince us that anthropogenic global warming is a fantasy cooked up by climate scientists who are part of some dark conspiracy; that, somehow, either the burning of fossil fuels doesn’t increase the amount of carbon dioxide in the atmosphere, or that carbon dioxide isn’t a greenhouse gas. Thus it comes as no surprise that the new Republican tax proposal “repeals the tax credit currently allowed for taxpayers who own a ‘qualified plug-in electric-drive motor vehicle.’ Under current law, a taxpayer may claim a maximum credit of $7,500 for each qualified plug-in electric-drive motor vehicle placed in service.” But the Republican plan “would take that benefit away.” [1] One wonders if they will bother to try to assure us that the proposed change has nothing to do with the interests of the oil industry.

But let us leave questions of climate change aside for the time being, in the grim recognition that those who deny its anthropogenic origins are unlikely to be persuaded by such pedestrian sources as facts. Let us instead consider the impact of the tax credit’s removal on capitalists, a segment of the population which reputedly enjoys Republican favor.

For it has come to pass that ending the tax credit will adversely impact Tesla, Inc., which specializes in electric cars, in a serious way. The tax credit, as Fortune points out, “is a big incentive for automakers like Tesla and their customers to do business together. And the proposed cut couldn’t come at a worse time for Tesla stock—with the Tesla Model 3 prepared to start shipping in higher quantities, consumers will need to decide if they want one at a higher price, should their car arrive after the GOP tax plan passes through Congress (assuming it does indeed pass).” [2]

Sales of other cars from other companies, such as “the Nissan Leaf, and GM’s Chevy Bolt,” can also be expected to take a hit. This means that these companies will have to make major readjustments.

“Automakers have factored the amount of these tax credits into their pricing, and have been relying on the government program to make electric vehicles more affordable and competitive with gas-only cars. 

“To date, incentives like the electric vehicle tax credit been largely successful in spurring both development of and consumer interest in the new automotive technology. For example, GM recently announced that it will offer 20 all-electric vehicles by 2023.”

So what is the lesson to be learned? That nobody should rely on government policies, because the other party might come to power and steer the ship of state in the opposite direction? James Madison warned us of some of the disadvantages that can arise from an overly mutable government in Federalist No. 62:

“The internal effects of a mutable policy are still more calamitous. It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice…if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is today, can guess what it will be tomorrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?

“Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few over the industrious and uninformed mass of the people. Every new regulation concerning commerce or revenue, or in any manner affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the few, not for the many.

“In another point of view, great injury results from an unstable government. The want of confidence in the public councils damps every useful undertaking, the success and profit of which may depend on a continuance of existing arrangements. What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government? In a word, no great improvement or laudable enterprise can go forward which requires the auspices of a steady system of national policy.” [3]

The electric vehicle tax credit made one set of business plans and investment strategies desirable. The repeal of the tax credit will make them less so. Is that how we really want to reward and punish the business community, by how well they predict future government action? And what impact will this have on future innovations? Moreover, the Trump administration came into office with the promise of revitalizing domestic manufacturing. How will deliberately harming American automakers accomplish that?

When you have two political parties pulling in opposite directions, each seeking to satisfy the desires of their business patrons, the result is going to be unstable government. And unstable government cannot be relied on, either domestically or internationally. 

We really need to get a handle on this.