An EV Charger for Everyone—Courtesy of Taxpayers

Treasury rewrites subsidy rules so nearly everyone qualifies, continuing to blow open the Inflation Reduction Act

WSJ editorial. 

"Is midtown Manhattan a low-income community? It is according to the Treasury Department’s new proposed guidance to determine eligibility for an electric-vehicle charger tax credit. This is how Biden regulators are blowing open the Inflation Reduction Act’s subsidy spigot.

The IRA revised a tax credit for “alternative fuel vehicle refueling property” that covers up to 30% of the cost of installing EV chargers. But charging stations must be located in low-income or non-urban areas. This was intended to jump-start EV purchases in rural and poor communities.

Even with the tax credit, it still might not be economically attractive or feasible to install chargers in rural areas amid electricity grid constraints. Why would a business install a charger if too few people are driving EVs? Businesses complained that limiting the credit to strictly defined low-income and rural communities would reduce its impact.

Enter Treasury, which this month proposed guidance that would let two-thirds of the U.S. population qualify for the credit. Treasury defines a low-income community as a Census tract with a poverty rate of at least 20%, or where median family income doesn’t exceed 80% of the metropolitan area’s median family income.

That means many people living in affluent metros like New York City, San Francisco’s Bay Area and Los Angeles will qualify for the credit if they live in neighborhoods that are relatively less wealthy than nearby communities. That includes Manhattan’s Times Square, based on the Energy Department’s credit eligibility map.

Treasury also broadened the definition of “non-urban” to include Census tracts in which at least 10% of blocks are “not designated as urban areas.” If an urban neighborhood abuts a rural community, it could still qualify for the credit. The guidance says “the 10-percent threshold is within the range” suggested by public comments.

But Treasury’s guidance flouts the spirit and letter of the law, as West Virginia Sen. Joe Manchin noted in a fiery statement. “The Administration just will not stop ignoring the law in pursuit of its radical climate agenda—no matter the cost,” he said. Its guidance “completely spits in the face of rural America” by making “close to the entire country eligible.”

Treasury is rewriting the rules on green energy tax credits left and right so it can hand out more subsidies. It has let more EVs qualify for the $7,500 tax credit by easing the IRA conditions on material sourcing. This includes redefining “free trade agreements” to include deals with countries that commit not to impose trade barriers on critical minerals.

It has also let leased vehicles qualify for a separate commercial EV tax credit, which doesn’t include material sourcing or income limits. The upshot is that the IRA’s climate and energy subsidies will cost far more than the $391 billion that Democrats claimed when they passed the bill. Goldman Sachs estimates the tab at $1.2 trillion over 10 years.

Treasury’s guidance also illustrates how regulators exploit the legal doctrine of Chevron deference, which requires judges to defer to regulators’ interpretations of putatively ambiguous laws. All too often they use this as a license to rewrite clear laws to advance policy goals. For this Administration, the goal is to shower green handouts far and wide."