Republican governors push Congress to drop EV tax credits for unions

Riley Beggin
The Detroit News

Washington — Nearly a dozen Republican governors from auto-producing states urged congressional leadership on Wednesday to drop tax credits for union-made electric vehicles from Democrats' climate proposal.

The list includes governors of several states that are home to Detroit Three assembly plants, which are unionized by the United Auto Workers. Among them is Gov. Bill Lee of Tennessee, where Ford Motor Co. recently announced it would spend $5.6 billion to build an EV assembly, battery manufacturing and supplier campus.

Bill Ford Jr., Executive Chairman Ford, and Bill Lee, Governor of Tennessee, share some small talk at the end of Ford's Blue Oval City event in west Tennessee. September 28, 2021.

"We are deeply concerned that Congress is considering legislation that gives union labor a competitive advantage over non-union labor in the electric vehicle market," the governors wrote in the letter led by South Carolina Gov. Henry McMaster. The governors of Alabama, Arizona, Arkansas, Florida, Georgia, Indiana, Mississippi, Oklahoma and Texas also signed the note.

"We cannot support any proposal that creates a discriminatory environment in our states by punishing autoworkers and car companies because the workers in their plants chose not to unionize. This legislation is not about supporting emerging technology but is instead a punitive attempt to side with labor unions at the cost of both American workers and consumers."

The EV tax credit proposal is part of Democrats' social safety net and climate legislation being debated in Washington. Rep. Dan Kildee, D-Flint Township, and Sen. Debbie Stabenow, D-Lansing, spearheaded the legislation, which would eliminate the automaker cap on EV credits and implement up to $12,500 in point-of-sale consumer rebates. 

Vehicles built by union workers would qualify for $4,500 worth of credits, and vehicles with batteries made in the U.S. would get an additional $500 consumer credit. Beginning in 2027, vehicles would have to be assembled in the U.S. to qualify for the full $12,500 worth of credits.

The governors all represent "right-to-work" states, which have state-level laws that bar workers from being required to join a union as a condition of employment and which have a lower rate of union membership than non-right-to-work states. Proponents argue the policy contributes to a more competitive economic climate and protects individual freedoms, while opponents argue it undermines collective bargaining and the higher wages and benefits associated with unions.

New EV investments in right-to-work states by Detroit Three automakers have raised questions among labor advocates about what role the UAW will play in the new operations. The Detroit-based union has struggled to gain a foothold in the South, and its future is predicated on current and would-be members being a key part of the automotive industry's transition to electric vehicles. 

Executives at Ford and General Motors Co. have said it is up to workers to determine whether future EV plants in Kentucky, Tennessee and elsewhere will be unionized. Experts have predicted the unionization attempts at Southern plants will face strong political headwinds.

The governors' letter marks the latest pressure point on the proposed credits, which have been one of the most controversial auto-related elements of the legislation to enact President Joe Biden's agenda. Last week, the Canadian government argued against the credits that incentivize buying autos built in the U.S

Late last month, executives at 12 major foreign automakers — including Honda Motor Co., BMW AG, Hyundai Motor Co., Nissan Motor Corp., Volkswagen AG and Toyota Motor Corp. — signed a letter to House Speaker Nancy Pelosi, D-Calif., urging her to reject the extra credit for union-made EVs, arguing that the proposal would limit consumer choice and get in the way of reaching President Joe Biden's carbon-reduction goals.

Tesla Inc. CEO Elon Musk, who company is the largest U.S.-based EV producer and does not have unionized assembly plants, has also criticized the proposal. 

The United Auto Workers, the Detroit Three carmakers and leading environmental organizations such as the League of Conservation Voters, the Environmental Defense Action Fund and the Sierra Club have expressed support for the legislation.

More than 100 Democratic members of Congress, including all of Michigan's Democratic representatives in the House, also signed a letter to House leadership last week urging Pelosi to retain the EV tax credits, arguing it would bolster the domestic supply chain and create good jobs. The group, led by Rep. Thomas Suozzi, D-New York, argued that union workers earn more than their non-union counterparts and are more likely to have paid sick days and health insurance. 

Democrats are negotiating the scope of the partisan package, originally slated to direct around $3.5 trillion in spending to enact major changes to the social safety net and climate policy. There's no indication tax credits are on the chopping block as they seek to narrow the proposal, but negotiations remain in flux. Democratic leaders have said they're aiming for the end of the week to announce an agreement. 

The fight over the $4,500 credit for union-made EVs comes as the industry grapples with how to protect jobs for auto workers in the transition to electric vehicles. EVs require fewer parts and less maintenance, leading some in the labor movement to fear workers will be left behind as plants stop producing gas- and diesel-powered vehicles.

The UAW has expressed support for the Biden administration and Detroit Three's push to electrification, but have repeatedly said any federal policy that seeks to accelerate the transition should also include protections for workers.

Twitter: @rbeggin