When John Buckley bought a fully electric Volkswagen e-Golf to replace his 12-year-old Toyota Prius hybrid, he figured it was a smart trade up. The Prius, despite its tree-hugging reputation, burned thousands of gallons of gasoline over its lifetime. And the emissions-free e-Golf came with $10,000 in government rebates.
“I like to think I’m buying my kids a few extra seconds of clean air, relative peace, and time to figure things out,” the Baldwin resident said. “I do not miss gas stations.”
But, he quickly realized, his idea was far from original. Though he bought the $26,000 Volkswagen three months before Maryland offered a new round of electric vehicle incentives — the $6 million just became available July 1 — all the money for the new fiscal year was already spoken for.
Buckley had to join a waiting list for the $3,000 state tax credit he was counting on, in addition to the larger federal rebate he’ll get when he files his taxes for 2019. There’s no cap on the number of people who can claim the federal credit.
But as car prices fall, battery capacities grow and charging stations proliferate, demand for electric vehicles has surged to the point where Maryland’s tax credit program — designed to entice buyers — cannot keep up. The state doubled its spending on the incentives for the fiscal year that began this month, but a backlog of applications meant the money was doled out quickly.
Clean car advocates say the popularity shows the program is achieving its goal: helping to accelerate sales of emissions-free vehicles as more come on the market, and at prices inching closer to parity with gasoline-powered vehicles. The number of electric vehicles registered in Maryland doubled from 2017 to 2018, and reached more than 18,000 as of February.
“Everyone wants us to sell more electric vehicles, which is great,” said Peter Kitzmiller, president of the Maryland Automobile Dealers Association. “The effect is, this money keeps running out sooner and sooner.”
That is prompting questions about how much the state should put toward electric vehicle tax credits going forward, and whether it should perhaps reduce the amount applied to each sale so that it can subsidize a larger number of vehicles. After all, the state is still far from one of its goals to help reduce air pollution: having 300,000 electric cars registered in Maryland by 2025.
“We have to continue to accelerate and incentivize this,” said Del. David Fraser-Hidalgo, a Montgomery County Democrat who has sponsored electric vehicle-related legislation the past three years.
Vehicles are the largest source of carbon emissions in Maryland and across the Northeast, prompting Maryland and eight other state to form a partnership last year to create a regional cap-and-trade system for transportation-related pollution. Electric vehicle use is a key element of strategies to reduce planet-warming greenhouse gases and health-harming pollutants.
With that in mind, Maryland began offering its electric vehicle tax credit in 2011, providing about $15 million toward the purchase of 7,200 plug-in vehicles since then, according to legislative analysts. The program offers $100 for each kilowatt hour of capacity in the vehicle’s battery, up to $3,000. A federal income tax credit also provides up to $7,500 toward purchase of qualified all-electric or plug-in hybrid vehicles.
As sales of the vehicles have accelerated, so has demand for that money.
Anyone buying or leasing a new plug-in vehicle from July 1, 2017 to July 1, 2020 can file for the state credit, and many do so with the help of auto dealers before they drive a car off the lot. But as more people buy electric cars, a waiting list for the credit has grown — with each new infusion of state money disappearing more quickly every year.
The $3 million allocated for Maryland electric vehicle tax credits in fiscal 2019, which ended in June, was gone by November. The money went to drivers of 1,178 vehicles.
Twice as much money was allotted to the program by the governor and legislators during the General Assembly session that ended April 8. But the credits were used up even before fiscal 2020 began in July. State transportation officials said more than 2,400 applications, many of them on file with the Motor Vehicle Administration for months, were approved by April 22. That meant this year’s money was already spoken for when Republican Gov. Larry Hogan signed the legislation a week later.
That came as a surprise to car buyers like Buckley, many of whom research financial incentives before visiting a dealership, Kitzmiller said. The auto dealers group has been working to provide information about the state tax credit that they can share with customers. So far, most buyers have been understanding, he said.
“It’s a stretch to say they’re not buying the car” if they can’t get the state money, Kitzmiller said. “They’ve decided they’re going to get an electric vehicle, so that’s what they’re going to do.”
But as the state looks to continue to encourage use of electric vehicles, Fraser-Hildalgo said he’s brainstorming ways to further promote sales. That could include again increasing the amount of taxpayer money put toward subsidizing the vehicles, or perhaps adjusting the formula that determines how much of a financial break each applicant can receive.
“To reach our goal, year over year, we need to double electric vehicles,” he said. “We’ll be working hard to figure out some way of doing it.”
Critics of the tax credit, including representatives of the fossil fuel industry, argue it benefits the wealthy and puts money toward cars many people would buy anyway. Under the same legislation that increased state funding for the tax credit this year, it can be applied to vehicles with price tags up to $63,000, up from a previous ceiling of $60,000.
Fraser-Hildalgo said opponents overlook the fact that far larger financial incentives go to the fossil fuel industry, such as permission to use federal lands for drilling. Government support for electric vehicles — which also includes $3 million in state tax breaks for purchase of vehicle charging equipment — is far smaller, but arguably more important, he said.
“We really have to keep promoting” electric vehicles, Fraser-Hidalgo said. “This is the future.”
That’s what motivated Buckley. With three young children, he said, “I'm well aware that nothing we do is sustainable.” Knowing that he’s helping to combat climate change is, perhaps, the biggest perk of his new ride.
But now he has to wait, and cross his fingers, that he will get a financial reward, too. He’s on a waiting list for the state tax credit that is more than 700 people long, and growing.