Call it the Trump vs. Newsom Show. As with many California governors before him, Gov. Gavin Newsom is angling for the Oval Office. To do so, he’s pitting himself as the most prominent Democrat opposing the incoming administration of President-elect Donald Trump.
On the positive side, speaking at the border with Mexico on Thursday, he attacked Trump’s proposed 25% tariff on imports from Mexico as “one of the biggest tax increases in U.S. history… 90% of these tariffs will impact the bottom of our economic chain, meaning lower wage workers that pay over half of these taxes.”
But Newsom also is pushing dubious proposals. With Trump expected to end a $7,500 tax credit for electric vehicles, Newsom wants to restore a California version, also for $7,500, that was phased out last year. But his press release said the new rebate “would include changes to promote innovation and competition.”
That means it would exclude Tesla. Which brought a retort from CEO Elon Musk on his X platform, “Even though Tesla is the only company who manufactures their EVs in California! This is insane.” Tesla’s Fremont factory alone is capable of producing upwards of 650,000 electric vehicles.
According to the California New Car Dealers Association’s third-quarter Outlook, EV sales in 2024 through September were 22.2% of the new car market, up from 5.8% in 2020. And of 293,109 EVs sold in that period, 159,619 were Teslas, or 54.5%. The next highest brand was Chevrolet at 5.2%.
Newsom’s proposal still must be hashed out in the Legislature, where it may run into opposition among his fellow Democrats. Said Rep. Ro Khanna, whose district includes the Tesla factory, “I don’t think politics should interfere with manufacturing or an issue of our national competitiveness.”
Then there’s the cost to the state treasury. If current trends continue, about 391,000 EVs will be sold in California for all of 2024. The non-Teslas will be about 178,000. If each got a $7,500 state tax credit, that would be a $1.3 billion hit to the state treasury. And given Newsom rightly is concerned about poor people being hurt by Trump’s tariffs, the same holds for car buyers, with wealthier ones benefitting more from an EV credit. According to GM Authority, in 2023 EV buyers’ median household income was $140,000, higher than the $115,000 average for all buyers.
What we have, then, is a situation in which higher income Californians would receive a subsidy from the state. All the while, Newsom uses that very subsidy to try to stick it to a political rival. This is a poor use of finite state resources and a showcase of why it is generally a bad idea to allow politicians to pick winners and losers.
It would be best for the Legislature to skip reviving the state’s EV credits. If people want to buy electric vehicles, great. Let them use their own money to do so.
Here is the link to the article in Tuesday, December 10, 2024 Daily Bulletin.
A special Thank You to our Legislative Chair, Hayden Lening who provided the information.
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