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California Aims to Slash Sales Tax on EVs

By on Mar 2, 2015 in Economy, Electric Vehicles, Environment |

Environmentally conscious California is considering a bill that would dramatically cut the sales tax on new green cars. According to Green Car Reports, the proposed law calls for reducing the sales tax on battery-electric cars, plug-in hybrids, and hydrogen fuel-cell vehicles to 3.06 percent, compared to the current 7.5 percent. If passed, the sales tax reduction would be an absolute shot-in-the-arm for the burgeoning EV industry – and not to mention the consumers that will keep more money in their pockets. Screen Shot 2015-03-02 at 2.57.08 PM

The measure being debated in Sacramento comes as no surprise, as California leads the nation in pro-plug-in legislation. In fact, the legislature tried to pass a similar version of this bill in 2013, but it lost momentum due to concerns over funding. This time the measure stands a better chance of passing thanks to the state’s improved fiscal outlook, and Gov. Jerry Brown’s strident stance on reducing California’s carbon footprint.

The main obstacle – as is the case for any tax break – is finding a way to make up the lost revenue. The Los Angeles Times estimates that $96 million per year would be lost between 2016 and 2020 – the period for tax cuts specified in the bill. The Times calculated that number by using the total number of plug-in sales in California (60,000) for 2014, and baselining that with the national average transaction price of $34,700. Plug-in sales, particularly in California, are growing year-over-year, so it’s possible that substantial increases in the sales volume would help ameliorate the tax situation.

Notable EV-friendly actions by Gov. Brown of California:

  • Gov. Brown signed an executive order in 2012 calling for 1.5 million zero-emission vehicles on California roads by 2025.
  • In his inaugural address last month, he proposed cutting petroleum use in cars and trucks by 50 percent between now and 2030.