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GM May Face Repercussions after Closing Five Plants

GM faces severe criticism after it announced the closing of five plants and more than 14,000 layoffs. President Donald Trump is unpleased by the news and announced via Tweeter that the federal government may cut all the tax breaks and subsidies received by GM, including tax credits for electric vehicles.

The threat seems real but the actually doing it will be a difficult task.

The EV credit is granted to consumers

When the Congress decided to establish the credits back in 2015 the aim was to encourage consumers to buy eco-friendly cars. In 2007 the law was expanded and consumers that bought an electric vehicle qualified to receive up to $7,500 in federal tax credits on the tax return. The decision aimed to make electric vehicles more affordable as the technology was still relatively new and many were unconvinced by advertising.

There is a catch: after a manufacturer sold 200,000 electric vehicles the credit will begin to phase-out until it is completely removed. The Chevy Volt is rapidly approaching the limit and it may break it by the end of the year, triggering the phase-out process. Tesla has already achieved the limit.

It’s up to the Congress

Any change that affects spending must be voted by the Congress. A bill that proposes the removal of the 200, 000 vehicle limit in exchange for a total phase-out in 2022 is already being discussed. Two more bills that also tackle this issue have been presented last month.
It mainly benefits high-income households

The electric vehicle credit policy has faced heavy criticism before since high-income households are the main beneficiaries. Almost 80% of the households that claimed the benefit enjoy an average gross annual income of more than $100,000 and more than 99% if the credits were claimed by huoses with an average income of $50,000.

What will happen in the following days remains to be seen but G.M. is already facing consequences as its stocks started to plummet after the announcement.

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