AUGUSTA — A bill that creates up to a $1,000 tax credit for those who purchase a plug-in electric vehicle by 2017 is working its way through the Legislature.
It's the second time in as many years that lawmakers have seen a bill that would replicate in state tax law, a credit also available under federal law.
The bill, sponsored by Sen. Geoff Gratwick, D-Bangor and co-sponsored by Sen. John Cleveland, D-Auburn, would allow a state income tax credit equal to the amount a person pays in excise tax on a new plug-in electric vehicle up to $1,000.
Federal law already allows a $7,500 income tax credit for the purchase of an all-electric plug-in vehicle.
But testimony for the bill Monday before the Legislature's Taxation Committee was mixed as Republicans noted the measure amounts to a tax break for only those who can afford a high-priced electric vehicle.
GOP leaders also voiced frustration with government attempting to manipulate the market place with tax incentives.
“Republicans support tax cuts, but we oppose market-distorting handouts to the green energy industry that benefit only those who need the money least,” said Rep. Ken Fredette, R-Newport, said in a prepared statement.
Taxation committee member Sen. Doug Thomas, R-Ripley challenged witnesses Monday including Jim Mitchell, a lobbyist working for General Motors.
"I don't understand the fascination with plug-in electric vehicles," said Thomas told Mitchell. "Why should Maine taxpayers who are having a hard time keeping a roof over their head and food on the table be subsidizing cars that are this expensive?"
Thomas also said it seemed to him the idea that electric vehicles are better for the environment wasn't that well thought out, given many of them are charged with electricity that comes from coal-fired power plants.
Mitchell said he couldn't explain the "fascination" but noted electricity was quickly becoming an important fuel source for transportation in the U.S.
"There is a concern always, that the supply of a lot of petroleum comes from resources that have to be imported from overseas," Mitchell said. "There is a benefit for North American consumers to try to diversify outside of petroleum products."
Mitchell said that coal was still a big source of electricity in the U.S. but that it was still a domestic energy source.
He said the cost of the incentive in Maine would be "fairly modest" as there are only about 200 plug-in electric vehicles registered in the state.
"Moving to new technology in the automotive field is a fairly important part of ensuring there is a diversity of fuel types to allow consumers to have choice in terms of how their vehicles will be propelled," Mitchell said.
Mitchell said there were about 25 other states that offered incentives to people buying plug-in electric vehicles. Those incentives vary from tax credits and rebates to things as simple as free parking.
He agreed the vehicles were expensive but noted the prices have come down dramatically. The Chevy Volt, he noted had a suggested retail price of slightly less than $32,000.
"So it is a fairly expensive mid-sized vehicle, and the sales reflect that," Mitchell said. But in just a few short years the price has dropped dramatically from about $40,000 per car, Mitchell said.
Christopher O'Neil, representing Friends of Maine's Mountains, said his organization was in favor of the bill because unlike other types of incentives for clean energy this one is directed, not at the supply side but at the demand side.
He said the bill also has built-in protections because it sunsets in 2017.
O'Neil said he drives a pick-up truck and a plug-in electric and that the sticker price on the plug-in was high but his savings in gasoline costs makes up the difference — that and the federal tax credit that was available made the car affordable and sensible.
But others speaking against the measure, including Carol Weston, a former state senator and the state director for Americans for Prosperity, said it still amounts to a taxpayer-backed subsidy.
Based on the testimony she heard Weston said there was already incentives to purchase electric cars including the savings on gasoline costs.
"Why should we demand from your constituents that they help make it more financially feasible for other people?" Weston asked the committee. "If there is a gain to be made that should be incentive all by itself."
Also speaking in favor of the bill was Dylan Voorhees, with the Natural Resources Council of Maine — the state's largest environmental organization.
"We believe that electricity is one of the most-likely non-oil fuels that will be available for consumers in Maine and else wheres in the future," Voorhees said. "Electric vehicles are much cleaner than even the most efficient hybrid vehicles that are available."
Voorhees said that does depend on how the electricity is made but in the Northeast and Maine where most electricity comes from cleaner sources such as natural gas and hydro dams — they do make sense. Voorhees also said the state offered incentives for hybrid-electric vehicles.
"There's a public interest in having cleaner vehicles that emit less pollution and lower public expenditures on gasoline," Voorhees said. He also said that if there is substantial market growth in electric vehicles it creates potential for spin-off growth in building infrastructure to support electric vehicle fleets.
"It's not just to see the vehicles, but it's to see more investment in the state of Maine in the infrastructure that relates to the electric-vehicle future," Voorhees said.
Gratwick's bill defines a plug-in electric vehicle as, "a motor vehicle with four wheels that is primarily propelled by an electric motor that draws electricity from a battery that has a capacity of not less than 4-kilowatt hours and is capable of being recharged from an external source of electricity."
Maine wouldn’t be the first state to pass such a tax credit. Colorado offers a tax credit of 85 percent for conversions completed between Jan. 1, 2010, and Jan. 1, 2012, lowering the cost of converting to electric hybrids.
The bill will come back to the committee for a work session March 8.