Reuters: Michigan Senator urges Congress to retain electric car tax credit

A Democratic U.S. Senator from Michigan on Wednesday urged his fellow lawmakers to retain a $7,500 tax credit for people who buy electronic vehicles instead of eliminating it as Republicans have proposed.

In a letter seen by Reuters, Senator Gary Peters wrote to Senate leaders that “a new generation of jobs and families will be supported by electric vehicles. Eliminating important economic incentives for electric vehicles would be a step in the wrong direction.”

Last week, Republicans in the U.S. House of Representatives proposed to eliminate the tax credit, which could hurt automakers such as General Motors Co (GM.N), Tesla Inc (TSLA.O) and Nissan Motor Co (7201.T).

Republicans in both chambers of Congress backed by U.S. President Donald Trump, also a Republican, are working on separate plans to give the U.S. tax code its biggest overhaul since the 1980s. Republican senators are set to introduce a tax proposal on Thursday. A spokesman for Senator Orrin Hatch, who chairs the Senate Finance Committee, did not immediately comment.

Critics of the credit say electric vehicle buyers tend to be wealthier than average and do not need subsidies.

Automakers have invested billions in electric vehicles and announced plans to shift significant production to plug-in models.

Current law allows automakers to use the credit, which phases out after an automaker hits 200,000 plug-in vehicles sold. Electric vehicles have expensive batteries that make them pricier than gasoline-powered vehicles. GM and Tesla may hit the limit for vehicles that can get the tax credit by 2019.

Environmental groups and an auto industry trade group oppose the House proposal, which would kick in at the end of this year. GM vowed to fight, saying the credits are “an important customer benefit that can help accelerate the acceptance of electric vehicles.” Tesla declined to comment.

Former President Barack Obama unsuccessfully proposed hiking the tax credit for electric vehicles to $10,000 and converting it to a point-of-sale rebate.

Automakers face mandates from California and a dozen other states to produce a rising number of zero-emission vehicles and have said the credits are essential to meeting requirements.