House Republicans are counting on both a repeal of vehicle efficiency regulations and an elimination of electric vehicle tax credits to earn them hundreds of billions of dollars in savings for their budget reconciliation push.
But there could be a snag: Republicans would not be able to count a large chunk of the potential savings from repealing an EPA efficiency regulation — what the GOP calls the “EV mandate” — if the EV tax credits are no longer in place.
Budget experts and energy analysts say that while that “chicken or egg” situation presents a tricky proposition, the twin goals could be achievable with some careful bill writing and friendly budget scoring.
The independent Senate parliamentarian, Elizabeth MacDonough, will have final say over the eligibility of those provisions in Republicans’ budget reconciliation package.
The GOP bill and MacDonough’s ruling could have sweeping implications not only for Republicans’ plans to pass major, party-line legislation this year but also for the burgeoning electric vehicle industry and the United States’ progress in reducing planet-warming emissions from its highest polluting sector.
“The tax credits are an easy one to be repealed. That’s a no-brainer,” said Thomas Kahn, who spent 20 years as a Democratic staff director on the House Budget Committee. “The [EV] mandates I think are going to be a harder argument to make.”
The reconciliation process allows the majority party to sidestep the Senate filibuster to pass legislation with a simple majority, so long as it meets a number of requirements, including that it have a material budget impact. That requirement is known as the Byrd Rule, named after former Senate Majority Leader Robert Byrd (D-W.Va.).
At the heart of the issue are the House Energy and Commerce and Ways and Means committees’ parallel but potentially intersecting reconciliation plans.
Energy and Commerce wants to scrap vehicle emissions regulations. And leaders plan to justify that move to the parliamentarian by asserting that such a repeal would help sustain revenues from the federal gas tax while reducing claims for the $7,500 EV tax credit expanded under Democrats’ 2022 climate law.
In other words, rolling back the rule would mean more gas-powered cars, leading to higher revenue. At the same time, the rule rollback would mean fewer people buying EVs — and claiming the credit — which would be a saving.
Yet at the same time, Ways and Means is working to repeal that same EV tax credit and other clean energy subsidies in the Inflation Reduction Act for additional savings, raising the question of whether Republicans would try to count EV tax credit-related savings twice — or whether they could possibly cancel each other out.
“It’s complicated,” said Robbie Orvis, senior director of modeling and analysis at the clean energy think tank Energy Innovation. “If they eliminate the tax credit, then [the Energy and Commerce Committee’s] argument doesn’t hold water.”
Energy and Commerce Chair Brett Guthrie (R-Ky.) has not put that plan in writing yet because the reconciliation process has not reached that stage, but he and Budget Chair Jodey Arrington (R-Texas) have both confirmed their thinking in multiple interviews.
They have pointed to Congressional Budget Office estimates that EPA’s rule regulating tailpipe emissions could add $224 billion to the deficit. They have repeated that repealing vehicle emissions regulations could garner more than $100 billion in savings for their reconciliation bill.
“That’s on the list of qualifying [rollbacks] that we can do, along with the green energy tax subsidies,” Arrington said recently. “Obviously, that’s sort of a ‘Byrdable’ policy consideration.”
The Ways and Means Committee is meeting this week to begin drafting plans for permanently extending tax cuts enacted during the first Trump administration. Part of those discussions could cover which clean energy tax credits members want to repeal to build up savings to pay for the tax extension.
Growing numbers of Republicans have come out in favor of preserving at least some of those climate law credits. Close to two dozen House Republicans sent a letter to Ways and Means Chair Jason Smith (R-Mo.) on Sunday warning of the possible economic consequences of repealing them.
Still, the EV tax incentives appear to be the least popular among Republicans and the most likely to stay on the chopping block.
“There’s sympathy for some of the tax credits,” Sen. Thom Tillis (R-N.C.) told POLITICO last month. “They won’t be eliminated en masse, but clearly some of them got to come out to give us a pay-for. The EV tax credits — they’re gone.”
Passing reconciliation tests
Budget experts and other outside observers say the challenge for Republicans will be figuring out how to write their reconciliation bill such that they can count savings from decreased use of the EV tax credits while also repealing those same credits.
The more fundamental issue of whether a regulatory rollback is allowed under reconciliation is less likely to draw objections as long as the language targets underlying statute and proves that there is a sufficient budget nexus, they said.
For example, in 2017, when Republicans used reconciliation to enact the Trump tax cuts, they rolled back a ban on oil and gas lease sales in the Alaska National Wildlife Refuge by repealing a provision in the Alaska National Interest Lands Conservation Act of 1980 that prohibited such uses. They argued the revenues would pay for about $1 billion of the tax cuts.
“It passed the test,” said Kahn, who now teaches about the budget process at American University.
He also stressed that each provision is subject to the interpretation of the parliamentarian, meaning that CBO scoring for projected savings and other justifications will be assessed on a case-by-case basis.
Indeed, Democrats could challenge Republicans’ assertions about the savings that could result from the repeal of EPA’s tailpipe rule by arguing that the savings would be “merely incidental” to the repeal, which would violate reconciliation rules.
If Republicans want to count EV tax credit-related savings toward their repeal of vehicle emissions rules, they will have to be intentional about the order in which they list their provisions. The bill would have to repeal the vehicle rules first to count those savings and repeal the EV tax credits later in the text
“You have to think about what’s the incentive structure for the majority to stack things in [a particular] order,” said Charlie Ellsworth, a partner at Pioneer Public Affairs and former budget staffer to Senate Minority Leader Chuck Schumer (D-N.Y.).
“You’re going to CBO with different drafts [and saying], ‘OK, well, what’s the score now if I do it in this order?’”
House Republicans’ fiscal 2025 budget resolution currently lists the Ways and Means Committee’s instructions last among all the committees, which would in principle allow the GOP to use the tax credits for savings before repealing them.
More complications
The House and Senate must adopt the same budget resolution to begin writing specific provisions in their bill, but so far each chamber has advanced its own unique resolution, and President Donald Trump has waffled over which approach he prefers.
Furthermore, House Republicans do not appear to be aligned on which vehicle efficiency regulations they are focused on repealing.
Some committee leaders have alluded to EPA’s regulation of greenhouse gas emissions from vehicle tailpipes, while others have referred to the Corporate Average Fuel Economy, or CAFE, standards issued by the National Highway Traffic Safety Administration to force automakers to gradually improve their vehicles’ fuel efficiency. The NHTSA regulation might not achieve the same savings as the EPA regulation.
Republicans are also dealing with parliamentary questions in their effort to make the Trump tax cuts permanent.
Senators are hoping they can rely on a “current policy baseline” for the tax extension, allowing them to attribute zero revenue losses to what would be a costly tax cut by assuming that the policy already in place will continue. In fact, without action, the tax policy would expire at the end of the year.
The nonpartisan Committee for a Responsible Federal Budget has called it a “massive budget gimmick that would justify and allow trillions of dollars of new borrowing.”
Rep. Chip Roy (R-Texas), who often bucks party leadership, earlier this week called the “current policy baseline” idea “fairy dust,” underscoring the challenge Republican leaders are up against in uniting their party around reconciliation provisions.
Roy added, “They’re full of crap. And I’m gonna call them out on it.”
