Written by Daniel S. Cohen, Contributor
Atlanta is now the #2 area for Electric Vehicle Sales in the US. Georgia’s Zero Emission Income Tax Credit is Threatened with Extinction. What to do?
According to the Wall Street Journal, Atlanta has the second highest EV registration of all metropolitan areas in the U.S. Approximately 2.15% of all new cars registered over the 12 month period ending March 31,2014 have been EVs. In 2013, 1.1% of all new cars purchased in the state were EVs. This placed Georgia in a tie for fourth in EV registration in the United States. The accelerated rate of EV adoption in Georgia can be explained, in part, by Georgia’s Zero and Low Emission Vehicle tax credits.
Current Georgia ZEV and LEV Tax Credits: Up to $5,000 for a ZEV and $2,500 for an LEV.
The state offers an income tax credit to all buyers of a new zero emissions vehicle (ZEV) of 25% of its value up to $5,000. By zero emissions, the state means that the vehicle does not emit any carbon dioxide from its tailpipe. This tax credit must be filed for but is not limited by manufacturer nor at this time, does it have a phase-out provision. The low emissions vehicle (LEV) tax credit is similar to the ZEV tax credit. It offers an income tax credit equal to 10% of a new low emissions vehicle up to $2,500. This credit is not phased-out or limited by manufacturer either. Hybrids and Plug-in Hybrid Electric Vehicles (PHEVs) do not qualify because they are partially or wholly powered by an internal combustion engine which emits CO2 and other gas vapors. Consequently, Battery Electric Vehicles (BEVs) and other Alternative Fuel Vehicles (AFVs: hydrogen, compressed natural gas, liquefied natural gas, etc) are favored. In Georgia today, the Nissan LEAF and Tesla Model S qualify for the ZEV Income Tax Credit but popular models such as the Chevrolet Volt or the Ford Fusion Energi DO NOT. Atlanta has become Nissan’s #1 market for its all electric LEAF, in part, due to the restrictions on Georgia’s income tax credits.
Benefits of Expanding the ZEV/LEV Tax Credit to Low Emission Hybrid Powered Vehicles
While the ZEV and LEV tax credits are beneficial, they do not go far enough to realize the benefits of cleaner air and lower carbon emissions. Many high quality, low CO2 emissions partially electric powered cars are not eligable for the ZEV/LEV tax credit. A PHEV/HEV subsidy would help Georgia improve its air quality and lower its carbon footprint significantly.
Reduce Carbon Dioxide Emissions
According to the U.S. Department of Energy, PHEVs emit between 40% and 60% fewer carbon dioxide particles than gasoline powered cars. In 2011, Georgians emitted 154 million metric tons of CO2, including 66 million metric tons from petroleum-based fuels. If Georgians drove hybrids, the state’s emissions would decrease by 20 million metric tons per year, or a double digit reduction of 13% of total state emissions, using a 30% CO2 reduction factor.
Put more money back in the pockets of Georgia Residents
Jake Fisher, the director of auto testing for Consumer Reports, told Design News that “in general, electric cars have been stellar” in terms of quality“. Fisher states that electric vehicles have a “reliability advantage” over traditional gas-powered cars. As an example, the Toyota Prius has been rated the highest quality green car for 11 of the last 12 years (the Honda Civic Hybrid is the only other car to win the award).
Hybrids exhibit lower costs to own than gasoline powered cars. Based on five year ownership data provided by Edmunds.com, Georgians can save $3,000 to $4,000 over five years by owning a Chevrolet VOLT or Honda Civic Hybrid vs. a Toyota Camry. The All electric Nissan LEAF saves its owner $4,500 or $900/year vs. the Toyota Camry.
True Cost of Vehicle Ownership, Edmunds.Com (July 2014)
|Year 1||Year 2||Year 3||Year 4||Year 5||Total|
|Camry SE (Gasoline)||$9,007||$7,494||$7,219||$7,496||$7,670||$38,886|
|Honda Civic Hybrid||$8,862||$6,880||$6,413||$6,728||$6,756||$35,629|
|Chevrolet Volt (PHEV)||$6,535||$7,503||$6,856||$6,908||$6,923||$34,725|
|Nissan Leaf (BEV)||$10,212||$6,397||$5,859||$5,905||$5,957||$34,330|
Create jobs for Georgians
Atlanta and the state of Georgia can tap the potential of new job creation through the build-out of EV charging infrastructure including traditional electric powered EV charging stations and Solar Powered EV charging car ports (see the photo gallery to see the GE Solar Car port located at the GE Energy offices in Marietta GA). This is an emerging industry and based on the needs for thousands of EV charging stations in the 7 million person/11 county metro Atlanta area alone, job creation and increased infrastructure spending potential in Georgia is phenomenal! Add to that the enhancement in personal income provided by the lower ownership costs of EVs, and Hybrids will help stimulate Georgia’s economy on the consumer demand side of the economic growth equation.
What to do about the current ZEV/LEV Income Tax Credit?
Ideally, the new Georgia legislative session will consider ways to preserve the positive impact of zero/low emission vehicles and shift its focus away from subsidizing battery electric vehicles and alternative fuel vehicles only. One simple solution is to adopt an income tax credit based on the vehicle’s annual CO2 emission (data provided by the US Department of Energy). The lower the CO2, the higher the Income Tax Credit. A threshold can be established at say 3.0 metric tons of CO2 or lower to qualify for the Income Tax Credit. The total amount of the Income Tax Credit can be capped in each budget year based on the number or percentage of low/zero emission vehicles sold. The multi-year carry over can also be eliminated to help off-set income tax revenue loss. Cutting the current $5,000 maximum ZEV Income Tax Credit in half is a good place to start. Capping the Income Tax Credit at an MSRP of $50,000 or less would support broader application of limited annual income tax credits for low emission vehicles.
As an example, a Toyota Camry Hybrid produces 2.8 metric tons of CO2 per year, making it eligable for a one time $750 income tax credit. The Ford Fusion Energi emits 1.9 metric tons of CO2, making it eligable for a one time $1,500 income tax credit. Finally, a Chevrolet VOLT produces only 1.2 metric tons of CO2 per year, making it eligable for a one-time $2,500 state income tax credit.
Georgians can also look to the seven other states that have income tax credits or rebates (another viable subsidy mechanism) for hybrids for guidance. The range of these subsidies (some are income tax credits, some are sales tax credits, and others are rebates) range from $250 (Maryland) to $6,000 (Colorado). The median income tax credit ranges from $1,000 to $2,500. Source: http://www.ncsl.org/research/energy/state-incentives-for-hybrid-vehicles.aspx; http://www.ncsl.org/research/energy/state-electric-vehicle-incentives-state-chart.aspx
Duration and Phase-Out of the Subsidy
Since the purpose of the income tax credit is to encourage Georgians to purchase low emission vehicles, the most important metric of success is the percentage of vehicles purchased each year that are low emission. The Georgia legislature can set the percentage of vehicles it wants to target and either end the subsidy once this target is reached or reduce the value of the subsidy as the percentage of EVs rise until the target rate is hit.
Whatever the incentive structure, the low/zero emission subsidy is important. Even a modest subsidy will help reduce Georgia’s CO2 emissions, increase disposable income , and improve the State’s commercial economy. Sounds like a win for everyone!