Envy to invest in electric cars generates 'industrial complex for tax exemption'

Envy to invest in electric cars generates ‘industrial complex for tax exemption’

There’s a battle of support raging on America’s shores: fierce fighting between nations for investments in electric cars and batteries.

The electric car revolution will be supported.

China has been at it for more than a decade, catalysing purchases, supporting domestic battery manufacturers and preventing foreign companies from competing. Europe has followed suit by providing generous aid to both consumers and businesses.

Now that electrification has taken hold globally, and there is a climate change believer in the White House, the United States is jumping into the fray in a bigger way than ever. First, there was $7 billion tucked into the infrastructure bill last year. Then, hundreds of millions were saved by invoking the Defense Production Act. Now, the Inflation Reduction Act is the mother of them all, which expands generous tax breaks for buying, building and charging electric vehicles, and localizing the supply chain for batteries to power them.

All this global competition is getting a lot of attention, but another support battle is raging within America’s shores: a fierce battle between nations for investments in electric vehicles and batteries.

There was a lot of headlines after Ford announced a year ago that it would invest $11.4 billion in Tennessee and Kentucky to build two new EV hubs, the largest spending in its history. GM also set a record for the company with its $6.5 billion investment in Michigan early this year.

What often ends up in the fine print of stories about these developments – if at all mentioned – are the tabs that taxpayers pick up on. Countries rarely disclose the full amounts, and instead dodge them over months in bits and pieces, or in response to requests for public information. Even then, calculating the full package is like putting together a jigsaw puzzle.

Bloomberg delved deeply into this in this story yesterday, which coincided with a new report from Good Jobs First, an outspoken critic of corporate incentives. Among the overarching policy questions the nonprofit researcher is asking: Why should states subsidize electric vehicles when consumer demand is clearly taking off?

Complicating matters, too: the notion that electric cars could end up being a job killer, rather than a source of jobs, if you eliminate all the losses associated with internal combustion engine components that are no longer needed.

Good Jobs First does a detailed analysis of some of the deals that states have struck with auto companies and battery manufacturers. The Georgian stimulus package of $1.5 billion for Rivian, for example, prominently promotes an average annual wage of $56,000. One needs to scroll down 130 pages to find that the minimum wage is $20 an hour, which comes to about $36,000 a year. The state’s economic development agreement also allows Rivian to use “employee hire” companies to rely on its job creation goals.

In Kansas, Panasonic’s $1.27 billion stimulus deal estimated by Good Jobs First includes some favorable terms for the Japanese battery company. According to the report, Panasonic has to invest five years of capital to win income tax credits, but it does not have to guarantee certain levels of employment or wages. If the factory is unprofitable and does not owe any taxes, the state remains obligated to pay the money each year, as long as the investments are made.

People on the left and right of the American political spectrum say corporate incentives can be time consuming and unnecessary. Even state officials who participate in the “industrial tax-exempt pool,” as the Good Jobs First report calls the phenomenon, admit it’s a hateful game. But the feeling is that they have little choice if they want to compete for these new jobs.

#Envy #invest #electric #cars #generates #industrial #complex #tax #exemption

Leave a Comment

Your email address will not be published. Required fields are marked *