GOP leader confirms plan to kill $7,500 EV tax credit in budget

Republican House Speaker Mike Johnson confirmed that current discussions about the $7,500 federal tax credit for electric vehicles in the budget would “more likely than not” result in killing the EV incentive.

The US Congress is back from its April pause, and negotiations over the federal budget continue.

As part of the new budget, the Trump administration is pushing for further tax cuts that the new tariffs can’t compensate for. This will lead to an even bigger deficit, which Trump campaigned on fixing.

Elon Musk’s DOGE effort was supposed to cut $2 trillion in expenses, but the target has since been revised to $150 billion by 2026.

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It’s now up to Congress to cut, and the federal tax credit has long been a target for Republicans, who now control the Senate, the House, and the White House.

Today, House Speaker Mike Johnson gave an update on the negotiations and said that they are more likely than not going to kill the EV tax credit (via Bloomberg):

“I think there is a better chance we kill it than save it. But we’ll see how it comes out.”

Most experts agree that Trump’s proposed tax cuts will increase the US deficit by at least $4.5 trillion over the next decade.

In 2024, the federal government is estimated to have spent about $2 billion in advance point-of-sale EV tax credit payments.

It’s less than a drop in the bucket.

Electrek’s Take

This is more about politics than about fiscal responsibility.

The tariffs amount to a giant tax increase on the entire US population, while Trump’s proposed tax cuts are structured to benefit the top 1% the most. The top 1% earners in the US are expected to get about 25% of the total benefits from the tax cuts, while the top 5% should get nearly half.

Meanwhile, the US has a growing debt problem, and these tax cuts would add to the deficit.

But not to worry. Cutting $2 billion a year in spending on electric vehicles, which helps the US not fall too far behind the rest of the world in the critical electrification of the auto industry, one of the last major manufacturing industries in the US, will help close the gap.

It would be funny if it weren’t such a serious issue.

That said, we knew it was coming since the elections. The main question is about timing. The budget is now expected to pass at some point between the end of May and the end of July.

If the EV tax credit is indeed removed, there should be a grace period. The GOP has already proposed a few pieces of legislation over the last year, and some included provisions to retain access to the credit until the end of the year, while others would end it by the end of the following month after the legislation passes.

The latter would certainly be problematic, but it would boost EV sales in the US as buyers would try to take advantage of the credit before it goes away.

As the biggest EV automaker in the US, Tesla would likely be the most affected by the end of the tax credit.

In the short term, companies like Rivian and Lucid wouldn’t hurt too much, as most EVs in their lineups are too expensive to have access to the tax credit, but it would hurt the prospects for their upcoming cheaper electric vehicles, like Rivian’s R2 launching next year.