From roads and bridges to EV tax credits and broad band, the twin infrastructure bills look to reshape and revitalize American transportation.
When the Biden administration first proposed a major infrastructure bill as their major legislative target, the resulting bill came for criticism mostly for its price tag of over $3.5 trillion rather than its content, which not only addressed traditional forms of infrastructure but also “soft” infrastructure that included investments in things like child and elder care, climate change mitigation, and healthcare.
Eventually, the bill was split in two, with a slimmed down traditional infrastructure bill to be followed by a subsequent bill containing much of the “soft” infrastructure that lacked support from Republicans and conservative Democrats.
The first of these, the Infrastructure Investment and Jobs Act, pass both houses of congress last month and was signed into law. We’ll layout all its major provisions below. The second, the Build Back Better Act has already passed the House of Representatives and is awaiting Senate approval. Though most of this bill contains “soft” infrastructure, certain important transportation provisions, like EV tax credits, were punted to the Build Back Better Act, (largely to make the Jobs Act more palatable to Republicans.
The Infrastructure Investment and Jobs Act’s final price tag rang up to $1.2 trillion. Since the bill contains new taxes, increased tax enforcement, as well as other budgetary off-sets and $650 billion in previously approved funds, the actual addition to the budget deficit will come, according to a CBO (Congressional Budget Office) estimate of $256 billion spread over ten years. Not quite budget neutral (as it was pitched), but in the larger context of crumbing US infrastructure, it may turn out to be a decent spend. And unlike much in Washington D.C., the bill was passed on a bipartisan basis.
The bill contains billions in funding and breaks down as follows. Basic infrastructure includes $66 billion for rail and Amtrack grants, $65 billion for expanded broad band access, $55 billion for water improvements, $25 billion to airports, and $39 billion for public transit. Personal and commercial transportation infrastructure includes $110 billion for improving roads and bridges and $11 billion specifically for improving road safety.
Funding for EV adoption took a huge hit in the final version. Originally proposed at $175 billion, the jobs Act musters $15 billion while the Build Back Better Act currently allots $13.5 billion for EV adoption (details to follow). In the final legislation, the Jobs Act contained $7.5 billion allotted for building a national EV charging network, $5 billion for electrifying public busing, and $2.5 billion for electrifying ferries.
If the US automotive fleet is to ever get close to widespread EV adoption, our electrical grid will need significant expansion. To that end, the Jobs Act earmarks $108 billion for refurbishing and expanding the US electrical grid.
Democrats plan to pass the second “soft” infrastructure bill along party lines via budget reconciliation, their only legislative means to avoid a Republican filibuster. As you might be aware, this has put a lot of power in the hands of two conservative Democrats, Sen. Kyrsten Sinema of Arizona and Sen. Joe Manchin of West Virginia who have both played major roles in shaping the legislation.
The Build Back Better Act contains much of the “soft” infrastructure that was dropped from their original proposal including expanding the Child Tax Credit, universal pre-K, child-care subsidies, and disabled and elder care funding. But, in the process of slimming down the earlier Jobs Act, may of the climate change mitigation policies, including EV tax credits, were culled from the bill and subsequently folded into the Build Back Better legislation. (That such provisions don’t play well in the “coal country” state of West Virginia isn’t a coincidence when Sen. Manchin is a key vote.)
The bill has already passed the House and it’s now up to the Senate to reshape it before passage (or potential failure). Though the current provisions are almost surely to change, here’s what’s currently in the bill as it relates to EV tax credits.
The bill touts up to $12,500 in EV tax credits. But the math to get to that number is … rough. First, there’s an initial $4,000 EV tax credit. Importantly, this new credit would be refundable, unlike the current EV tax credit. Under current law, your EV tax credit is applied to your tax bill, meaning if you’re not paying in on your federal tax return and instead get a refund, you get nothing. Making the current law more than a little regressive. Under the new bill, the $4,000 credit would be applied to either your tax bill or your tax refund. So far, so good. The next $3,500 in credits apply only to vehicles with a 40kWh battery capacity or higher. Makes sense, the government incentivizing real EVs over hybrids.
The next two credits are the most controversial. To get an additional $4,500 in credits, the vehicle must be built in a US factory with union representation. The same would go for another $500 for the batteries. Non-unionized manufacturers have cried foul, including Tesla, Toyota, and Honda. If you think that sounds counterproductive, you’re probably right. Unfortunately, it appears even saving the world from climate change takes a backseat to political patronage.
In its current form, the full $12,500 EV tax credit would only apply to two vehicles, the Chevrolet Bolt and Bolt EUV, the manufacturing of which is currently on pause until 2022 due to a massive battery recall. Note too, that the EV Tax credit would also be limited to those making $250,000 a year, or $500,000 for those filing jointly, and only to “heavy” vehicles like vans, trucks, and SUV with a price tag up to $80,000. So, the new GMC Hummer need not apply.
All isn’t doom and gloom for Tesla, however. The bill also eliminates the prior cap of 200,000 vehicles. Meaning both Tesla and GM would again be eligible.
The Build Back Better Act also contains $17.5 billion for converting the federal vehicle fleet to EV/zero emission vehicles, another $9 billion in additional electrical grid expansion, $5 billion in grants for converting heavy vehicles like trucks and buses to EVs/zero emission vehicles, and $150 billion in decarbonizing the US electrical grid.
Though these and the rest of the Build Back Better Act’s main goals are worth consideration, let’s hope the EV tax credit gets a revamp that truly incentivizes buyers, regardless of which brand they choose.