E-Bike Incentives in Tax Bill Are Laughable Compared to Those for Electric Cars

A big tax bill is working its way through the U.S. Congress, and it includes incentives for electric cars, which as Jim Motavalli noted recently in Treehugger, is causing its own controversies. But there is also a provision that creates a tax credit for electric bicycles, which had its roots in an earlier bill promoted by Congressmen Jimmy Panetta (D-Calif.) and Earl Blumenauer (D-Ore.). Panetta noted at the time:

“E-bikes are not just a fad for a select few; they are a legitimate and practical form of transportation that can help reduce our carbon emissions. My legislation will make it easier for more people from all socio-economic levels to own e-bikes and contribute to cutting our carbon output. By incentivizing the use of electric bicycles to replace car trips through a consumer tax credit, we cannot only encourage more Americans to transition to greener modes of transportation, but also help fight the climate crisis.”

Panetta wanted a 30% tax credit; that's not what got into the bill after going through what the website Systemic Failure calls "the Legislative buzzsaw of the House Ways and “Means-Testing” Committee." The act now offers half that in "Greening the Fleet and Alternative Vehicles"
section 136407.

"This provision provides for a 15% refundable tax credit for qualified electric bicycles placed into service before January 1, 2032. Beginning in 2022, taxpayers may claim a credit of up to $1,500 for electric bicycles placed into service by the taxpayer for use within the United States. A taxpayer may claim the credit for one electric bicycle per taxable year (two for joint filers). The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married filing jointly) at a rate of $200 per $1,000 of additional income... In order to be eligible for the credit, the aggregate amount paid for the acquisition of such bicycle must not exceed $8,000."

In summary, one can get a maximum of $1,500 or 15%, whichever is lower, and phases out after $75,000 of individual income or $150,000 of joint family income.

UPDATE: A reader points out that 15% of $8,000 is $1,200 so when they slashed the credit percentage they also slashed the maximum.

Electric Cars and Trucks

Now let's compare that to the tax credit for electric vehicles with four wheels, in section 136401:

"This provision provides for a refundable income tax credit for new qualified plug-in electric drive motor vehicles placed into service by the taxpayer during the taxable year. The amount of credit allowed by this provision with respect to a qualified vehicle is equal to the base amount of $4,000 plus an additional $3,500 for vehicles placed into service before January 1, 2027 with battery capacity no less than 40 kilowatt-hours, and for vehicles with a battery capacity of no less than 50 kilowatt-hours thereafter. The amount of credit allowed for a qualified vehicle is increased by $500 if the vehicle model is assembled by a manufacturer which utilizes no less than 50% domestic content in component parts of such vehicles and such vehicles are powered by battery cells which are manufactured within the United States."

So the subsidy starts off at $7,500, with a boost of $4,500 if it is made in the U.S. in a union shop, the provision that Motavalli was discussing, and $500 more if it uses American-made batteries, totaling $12,500. Notably, "the amount of credit allowed for a qualified vehicle is limited to 50 percent of its purchase price." And what are the limits?

"No credit shall be allowed for vehicle by which the manufacturer’s suggested retail price exceeds the applicable limitation," which is as follows:

• Sedans: $55k
• Vans: $64k
• SUVs: $69k
• Pick Up Trucks: $74k

The credit is phased out by $200 for each $1,000 of the taxpayer’s modified adjusted gross income as exceeds $800,000 for married filing jointly, $600,000 for the head of household, and $400,000 in any other case. For a given taxable year, the taxpayer may use modified adjusted gross income for that year or the immediately preceding year, whichever is lower."

Now let's compare the subsidies:

Now it is true that there are not many e-bikes made in the U.S., and that $5,000 of that electric car subsidy is going to promote American-made vehicles and batteries. But when the point of the bill is to promote greening the fleet, why such an obvious bias to promoting electric cars? Why do drivers of cars get up to 50% subsidy, while riders of bikes only get 15%? Why do families earning $800,000 per year get a subsidy at all?

Most of us agree that electric cars are wonderful and people love pickup trucks, and it is likely that many will complain that e-bikes are getting a credit of any amount. After all, they are just toys for the rich urban elite while pickup trucks are working vehicles for real Americans.

But hey, we're in a climate crisis where we should be encouraging smaller and lighter vehicles and maybe even alternatives to cars. A little fairness and equity would be nice too.