Green New Deal or Stale Old Tax-Break Scam? Getting Electric Vehicle Incentives Right – Non Profit News – Nonprofit Quarterly
Photo by Michael Marais on Unsplash
The rapid rise of electric vehicles (EVs) is about to disrupt state economies and budgets, but the tax break-industrial complex is on cruise control. Governments are suddenly throwing billions in subsidies at new EV assembly and battery factories. Uncle Sam, as usual, is MIA on industrial policy, so the “economic war among the states” is in overdrive.
Yes, we must convert and eliminate tailpipe emissions. But there is a right way to have a just transition and a wrongheaded “business as usual” corporate subsidy approach. Unfortunately, we’re seeing the latter.
States feel flush right now, thanks to multiple federal coronavirus relief packages (especially CARES and ARPA). But consider these EV-driven budget curves ahead:
- The conversion to EVs is expected by the auto industry to happen very rapidly, perhaps even 50-percent market share in the next eight years. That means massive dislocation for gasoline and diesel auto assembly workers—and more numerous auto parts makers—in many states.
- Auto manufacturing wages are headed down; not one non-Big-Three assembly plant in the US has a unionized workforce, nor do any new EV companies.
- EVs are much simpler mechanically than internal combustion engine cars, so they’re creating fewer parts and assembly jobs.
- The loss of old jobs, lower wages, and fewer new jobs all mean lower tax revenues.
- States and localities collect more than $52 billion per year in motor fuel taxes; that’s a lot of revenue to replace as EVs gain share.
- Yet states are also starting to budget billions to construct EV charging stations.
Despite all these dark budget clouds on the horizon, 2021 saw a bumper crop of massive “trophy deal” subsidy package announcements for EVs. They will reduce income, sales, and property tax revenues for decades.
For 2021: Big EV Announcements Accelerated
The list of recent subsidy deals is long. One example: in December, the state of Georgia announced that Rivian, an EV start-up that just went public, will build a large $5 billion factory east of Atlanta. Oddly, the state’s incentive package was not disclosed. But subsidies of more than $1 billion will not be surprising. The Atlanta Journal-Constitution writes that the deal is “expected to be the largest incentive package in state history.”
Then there is Oklahoma, which last summer promised at least $300 million to Canoo, also a start-up. This fall, the state of Tennessee announced subsidies totaling $884 million for a Ford Motor Company assembly plant with its partner battery factory of SK Innovation; full public costs are expected to exceed $1 billion. In December, North Carolina announced that Toyota will build a battery factory near Greensboro, with subsidies of more than $430 million. Most recently, General Motors just announced its intent to build two major battery factories in Michigan, saving the news for the day before Governor Gretchen Whitmer’s “State of the State” address. The state enacted $1 billion in new incentives targeting EV facilities—just 79 days after Ford’s announcement in Tennessee, which Whitmer called a “wake-up call.”
Other major automakers—Volkswagen, Stellantis (the parent now of Fiat/Chrysler as well as Peugeot), and Toyota—are expected to announce EV projects in the coming months. Public subsidy dollars can be expected to pay for large part of each of these projects as well.
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