Obama EV Credit-To-Rebate Plan Draws Senate Concerns

Montana Senator Max Baucus, Chairman of the Finance Committee, and a key Senate Democrat, expressed concern regarding an Obama administration proposal to transform the $7,500 tax credit for electric vehicle (EV) buyers to a comparable rebate at the point of purchase, an aide to the U.S. senator said.

Ryan Abraham, a counsel on the panel which handles tax legislation, told the Electric Drive Transport Association conference, on April 20, that the proposal might not provide as much incentive to potential EV customers as the current tax credit. Baucus is concerned the plan also could add a layer of complexity to the tax code, the aide said.

Abraham's comments suggest that Obama's proposal, and similar legislation submitted by Michigan Democratic Senator Debbie Stabenow, are in trouble.

Baucus, a Democrat, is the most powerful member on tax matters in the Democratic-run Senate, which is generally far more supportive of Obama than the Republican-controlled House.

A White House spokesman had no immediate comment.

Abraham said, though, that the current $7,500 EV tax-credit program, which began during the Bush administration, and was expanded under President Obama, is safe from Washington budget cutters.

As part of his February budget, Obama proposed changing the tax credit to a rebate at the point of purchase in an attempt to increase consumer incentives, by speeding the $7,500 payment. Under the proposal, dealers would, in effect, reduce the sticker price, and apply for reimbursement from the government. The $3 billion cash-for-clunkers program operated in much the same way, though the government was unprepared for its popularity, and developed a huge backlog of dealer applications.

Baucus is worried that, if dealers were to give customers a $7,500 rebate at the point of purchase, the incentive could become muddled because dealers also have the discretion to lower the price of the car, Abraham said. Dealers might mix the rebate with a price reduction, confusing the customer as to how much of each they received, the Senate aide said. Both the consumer and the dealer could conceivably claim a credit on their tax returns, he said. The IRS would have to address this potential complication.

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