Democrats' latest climate plan includes tax breaks for EVs that cost up to $80,000

Democratic lawmakers on Wednesday unveiled a revised social spending and climate provision that expands an electric vehicle tax credit of up to $12,500 for more expensive cars and proposes a lower income cut-off for buyers eligible for the credit.

The House Democrats’ update makes vans, sport utility vehicles and trucks priced up to $80,000 eligible for the full tax credit. The previous bill capped credits for vans priced at $64,000, SUVs priced at $69,000 and trucks priced at $74,000.

The proposal also limits the full tax credit for individual taxpayers reporting modified adjusted gross incomes of $250,000, or $500,000 for joint returns. The previous plan imposed limits at $400,000 for individual filings and $800,000 for joint filings.

The transportation sector is one of the largest contributors to U.S. greenhouse gas emissions, representing about one-third of emissions ever year. The transition from gas vehicles to electric cars and trucks will be critical to combat climate change.

The Democrats’ proposal includes a $4,500 tax incentive with the purchase of an electric vehicle made at a unionized factory. The provision would especially benefit automakers like General Motors and Ford, whose manufacturing workers are represented by the United Auto Workers union.

Republicans have opposed tax incentives for the purchase of electric vehicles made with union labor.

The tweaked legislation, which is part of President Joe Biden’s $1.75 trillion social and climate spending package, would provide a major boost to the electric vehicle market. Sales of electric vehicles are expected to represent less than 4% of U.S. sales this year, according to industry forecasters. 

Democrats this week are seeking to close out negotiations on the president’s Build Back Better plan. The House could hold a vote on the bill in the coming days.