Obama Budget Boosts Funding For More Efficient Cars, Hikes Electric-Car Tax Credit

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President Obama inspects the 2011 Chevrolet Volt

President Obama inspects the 2011 Chevrolet Volt

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President Barack Obama has said he wants to boost the Department of Energy's vehicle research budget 75 percent to help develop more efficient cars.

In his 2014 budget proposal to Congress on Wednesday, Obama proposes $575 million extra for research, and a further $2 billion trust fund to help research into getting off foreign oil in the next ten years.

According to The Detroit News, it's partly aimed at boosting the slow uptake of electric vehicles, and the budget speech included a call to hike the Federal income tax credit for electric vehicles to $10,000.

Back in 2008, Obama called for 1 million plug-in electric vehicles on the roads by 2015--a target that now looks a few years from reality.

While electric vehicle sales are steadily rising, they aren't increasing at quite enough of a rate to meet that target--and many automakers have scaled back their own predictions.

Currently, a maximum tax credit of $7,500 is available to eligible buyers, and some individual states also offer their own rebate programs for electric cars. An increased tax credit could help boost sales a little further, though it faces strict opposition from Republicans and the House.

But Obama also proposes to change the tax-credit rules slightly so that dealers can claim the credit. That would allow them to apply it directly to the price of the car, making it effectively a rebate at the time of purchase--rather than requiring buyers to wait up to 15 months, when they file their taxes, to realize the reduction.

Electric-car advocates have long urged that the credit be made a rebate to increase its attractiveness.

Potential tax credits for fuel-cell powered medium- and heavy-duty vehicles to be even higher--up to $40,000, as a way of incentivising the currently-expensive technology.

Despite political opposition, the carmakers themselves are keen on any move that helps increase sales.

The Alliance of Automobile Manufacturers, representing Detroit's Big Three, the Toyota Motor Corp., Volkswagen AG and others, said "We generally support incentives that can help move our models from dealer lots to people's driveways, but we defer to policymakers in setting the precise dollar amount needed to increase sales."

Money from the research budget would be used to speed up the development of battery technology and improved manufacturing processes, as well as the development of cellulosic ethanol and other biofuels.


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Comments (23)
  1. Instantly saving 10,000 would be great, especially when manufacturers like to pre-subtract the credit to make the price appear better. Like when you use the design studio on Tesla's website, they subtract the tax credit there but at the time of purchase the car is actually 7,500 more. With an instant rebate they can advertise the car at 10,000 less and that's the way it'll stay there won't be an issue when some customers miss the fine print.

  2. I wonder if this is simply tactical. Shoot for $10,000, fail, but keep the $7500 and maybe switch it from tax rebate to time-of-purchase incentive.

  3. Here's hoping the dealers don't just pocket the rebate as profit, either partially or in full. Can you tell I don't like dealers?

  4. This is the reason I think it should go directly to the car makers. Just like oil subsidies go to the oil companies, and not the consumers.
    Price the base Leaf at the dealer at $18.9K and let me know when any dealer can keep it in stock.

  5. "Price the base Leaf at the dealer at $18.9K and let me know when any dealer can keep it in stock"

    Is that before or after all the tax incentives?

    In California, a $28k Leaf would get about $10k in tax incentives ($7,500 federal + $2,500 state). That would be about $18k for a low end Leaf. My local Nissan dealer has about 15 of them on the lot...

    I think low monthly lease sell the Leaf. Lots of people worry about Leaf longer term battery issue so Leasing get rid of lots of that concern.

  6. The "tax credit" is absurd. Not only do you have to wait up to 15 months to receive it, but many buyers will not qualify. This is the dirty secret about the tax credit. In reality, the credit is not available to buyers who make less than $70,000 to $80,000 annually. (Depending upon other deductions such as mortgage, etc.)

    What this means is that most middle income and lower Americans are blocked from purchasing a plug-in electric. What dummy would effectively pay $7500 more for a car than his richer neighbor does?

    When your Republican congressman says that no one wants to buy an electric car, remind him (or her) that right now, these cars are reserved for only higher income elites. What a GREAT electric tax incentive!

  7. Oh, and to follow up with a suggestion: Why won't the feds consider a tax rebate the way California does it? In California, the state has you fill out an application and then returns $2500 to the buyer within 60 days.

  8. first of all one can file taxes at any quarter of the yr so you don't have to wait much.

    I'm thinking serious of building an EV, a really nice Gull wing Van I can do for $7500 so get it for free!!

    Sadly big auto keeps building overweight, over priced and overteched EV's when we really need composite 1,000lb ones that need a far smaller, less costly battery pack or use lead batteries.

    These could be made for under $10k with 80 mph and 100 mile range if big auto wanted to. KIS

  9. I know of no one who files quarterly and is not self-employed.

  10. Anyone who receives substantial unearned (i.e., interest, dividends, etc.) income is required to file and pay Federal tax on a quarterly basis. If you don't, and your withheld tax (from earned income) is less than last year's, or if you owe more than $500, you will pay interest and penalties.

  11. It would be fantastic to file for the $7500 tax credit on a tax quarter. Unfortunately, I don't see any provision on the tax credit form for this. You may be required to PAY taxes, but I don't see any provision for FILING A RETURN on a quarterly basis. PLEASE, if I am wrong, let me know how to do this.

  12. You can "pay" your taxes any quarter of the year. You "file" your taxes after January 1. I know of no way to take a credit in any quarter unless you are not on a calendar year tax filing. (And I don't know anyone who has elected otherwise.) I guess you are suggesting that you can take a credit on a quarterly payment at anytime after you purchase the car. I would hesitate from doing that unless you know you will not incur any interest or penalty for doing that.

  13. the instant tax credit is a good idea and Republicans would go for it because it would reduce their tax liability since many fall under AMT. Democrats will like it because it makes the car more affordable or am I guilty of "financial profiling?" either way, a great idea that should have been implemented a LONG time ago (like when I was in the market!)

  14. Great concept except where are the places to plug at? In one sad case a Nissan dealership refused a Leaf owner to use one of two locations to recharge! The locations must be, apparently, regulated like handicap parking slot. A quick online search of charging stations in Cincinnati produced ZERO locations.

  15. Check out one of the dedicated EV apps like Plugshare for your smartphone. It shows over a dozen public and dealer chargers within 20 miles of downtown Cincinnati. I admit I am spoiled by the easy access to public chargers here in northern California, but by far the most important charger is the one in my garage.

  16. Most drivers will plug in an home, most of the time. For the times that they don't, Plugshare.com shows 4 public and 11 Residential plug-in points in the greater Cincinnati area. VERY underserved, but not 'zero'.

  17. I think Ramon is talking about DC fast chargers...

  18. "But Obama also proposes to change the tax-credit rules slightly so that dealers can claim the credit."

    I don't like this for the simple fact that Dealer gets a "cut" in the process. Either give it to the automaker or the buyers directly (I prefer the buyer). Don't let dealer get their hand on it.

    Tax Credit is fine as long as you are allowed to do a "carry over". In case you made too little money, then you can carry forward the credit until you get the full amount. That will solve the problem with "low income" people.

    Generally, plugin cars require a person to have a house and garage. So, in a way, it is already restricting to a "higher income" demographics...

  19. Compition from other dealers will force them to give customers the rebate. And I agree if you could "carry over" the unused credit for a couple of years it would help. or at least help me when I bought.

  20. Competition with other dealers only work when there is competition. Some dealers are against plugin cars anyway. So, bypass them all together. They are NOT needed in the tax credit process. They will ONLY use the tax credit to "cloud" the final cost of the vehicle to you. Let them handle the price of the vehicle and let the tax incentive be decided else where...

  21. I am very pro electric vehicles but the President is doing the tax credit wrong. For his desire to tax the rich, his tax credit only helps the rich. Married filing jointly, you need at least a $100,000 income to get the full credit; make $80,000 you will lose about $2,000 of the credit..which can not be carried over and is last tax credit.

    EPA now has a test method to measure battery energy stored in the vehicle. The original rules are based on manufacture claim; use EPA's numbers. Some PHEV will lose credits like the Volt.
    If the tax credit is raised or not, the incentive should be based on a MSRP of $27,500/$30k and then reduce the tax credit for each additional dollar of price. Aim to get cars priced for mainstream, not the wealthy.

  22. "EPA now has a test method to measure battery energy stored in the vehicle"

    EPA had that test since their set up of MPGe test.

    "The original rules are based on manufacture claim; use EPA's numbers. Some PHEV will lose credits like the Volt"

    Huh? Where did you get this info from? The tax credit is NEVER about the range. It is always about the size of battery installed. It is designed to offset the battery cost in the car. Whether you can more or less out of the same size battery has NOTHING to do with it. As long as Volt has the 16KWh battery, it meets the guideline.

    By your "twisted" logic, PIP and C-Max Energi would potentially get ZERO credit...

  23. It could help provide a push that could get us to fully embrace EV's in order to reduce our reliance on fossil fuels for transportation. Electricity is a great fuel for our transportation needs since it can be made from renewable energy sources such as solar cells, and wind turbines and Hydroelectric as well as possible new forms of renewables such as tidal energy such as using the tides in a large river systems where they dump into the oceans as a way to generate electricity. Ev's can also be fitted with regenerative braking as well as new electricity generating shock absorbers that can generate electricity from bumps in the road as we drive too.

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