In February 2021 Representatives Jimmy Panetta (D-CA) and Earl Blumenauer (D-OR) introduced the Electric Bicycle Incentive Kickstart for the Environment (E-BIKE) Act to lower the entry price to get more e-bikes on the streets. It offers a tax credit of 30% up to a maximum of $1500 for new e-bikes, priced up to $8000. This has the potential to greatly increase the demand for e-bikes.
The higher cost of e-bikes compared to regular bikes is a barrier to adoption. By lowering the cost with a tax credit, demand will go up, therefore e-bikes can gain much wider adoption.
What does the E-Bike Act do?
The Act is a Federal tax credit to consumers who purchase a new e-bike up to a certain cutoff price point of $8000. It’s effectively a subsidy on the price of a new e-bike up to a maximum of $1500. Subsidies are a proven method to increase demand.
“E-bikes are not just a fad for a select few, they are a legitimate and practical form of transportation that can help reduce our carbon emissions.
“My legislation will make it easier for more people from all socio-economic levels to own e-bikes and contribute to cutting our carbon output. By incentivizing the use of electric bicycles to replace car trips through a consumer tax credit, we can not only encourage more Americans to transition to greener modes of transportation, but also help fight the climate crisis.Congressman Panetta
The Tax Policy Center has a nice explanation of what a tax credit is:
“Tax credits are subtracted directly from a person’s tax liability; they therefore reduce taxes dollar for dollar. Credits have the same value for everyone who can claim their full value.”
“One of the few positive developments of the last year has been the surge in biking. Communities large and small are driving a bike boom. Notably, electric bicycles are expanding the range of people who can participate and making bike commuting even easier,”Congressman Earl Blumenauer, the founder and co-chair of the Congressional Bike Caucus
How much tax credit can I benefit from?
The proposed Act covers 30% of the cost of an e-bike, up to $1,500 credit. It applies to new electric bicycles that cost less than $8,000 – which covers many electric bikes on the market. It’s a fully-refundable credit, which is important as lower income earners can benefits from this tax credit too.
What is the final e-bike price I will pay after the tax credit is applied?
Here is a table of a range of e-bike prices, from $2000-$8000. This price range covers a large chunk of the new e-bike market. It’s quite easy to understand the potential savings by looking below.
For e-bikes priced between $5000 to $8000 the credit remains at the maximum of $1500, and e-bikes priced above $8000 don’t benefit from the tax credit.
|New E-Bike List Price ($)||Saving from 30% Tax Credit ($)||Final Price Paid After Tax Credit Applied ($)|
|$5000||$1500 (maximum credit)||$3500|
|$6000||$1500 (maximum credit)||$4500|
|$7000||$1500 (maximum credit)||$5500|
|$8000||$1500 (maximum credit)||$6500|
|Above $8000||Tax credit does not apply||Same price. The tax credit is not valid|
As of today, one tax credit can be applied during a three year time period. However couples filing taxes jointly could apply for two tax credits in three years to cover two e-bike purchases.
Does the tax credit apply retroactively to previous purchases?
Currently, this is not mentioned in the press release.
It would be very nice indeed for those who bought an e-bike in the past few months to benefit retroactively from this tax credit.
But won’t this just drive up the cost of new E-bikes?
Unlikely. There is lots of competition in the E-Bike market, with multiple large global e-bike companies competing for market share. Many of the components like batteries and motors are starting to become commoditized, which means they become cheaper and standardized over time as they become more commonplace.
Therefore, domestic e-bike manufacturers are unlikely to benefit from driving up prices to take advantage of this tax credit as they will be out-competed by imported e-bikes of a similar specifications and quality. The US imported around 600,000 e-bikes in 2020 alone due to surging demand as a result of the COVID-19 lockdown.
Why does the E-Bike Act matter?
The higher price point of e-bikes compared to regular bikes is perhaps the biggest barrier to wider adoption and replacing cars on city streets. Therefore, any initiatives that lower the barrier to entry are to be welcomed. One of the perceptions about e-bikes is that it’s an activity for upper middle class consumers riding hugely expensive luxury machines. The E-bike Act will enable much more consumers to dip their toes in the water and become e-bike commuters, replacing ever more car journeys and de-congesting city streets.
The press release also references a study on e-bikes effect on emissions when replacing car trips. There is some low-hanging fruit when it comes to replacing car trips with e-bike trips – if 15 percent of car trips were made by e-bike, emissions would drop by 12%. Since 46% percent of e-bike commute trips replaced automobile commute trips, and a European study showed that between 47% to 76% of trips by e-bike replace a car trip, there is some readily accessible emissions reductions to be achieved by accelerating the rollout of electric bikes across the country.
Other factors why the Act matters:
- Subsidies are a proven, effective method to support an industry. Sometimes, they are controversial, such as subsidies that the oil and gas industry receives
- By activating the initiative now, it will build on momentum that has build up for e-bikes from pandemic. It has trailed off since last August – some of that is the onset of winter, see the screenshot above – but it would be a great idea to convince more people to get on an e-bike now that winter is ending
- Lower income consumers can benefit from the E-bike revolution too
- There is considerable health and exercise, financial and environmental savings to be achieved by replacing short distance car trips with e-bike trips instead
Who can benefit from this tax credit?
All American workers who must pay federal tax can benefit from this proposed tax credit.
When is it in force?
The bill first needs to pass through both houses of Congress. With the Democrats in control of both houses of Congress and the White House, there is a higher chance of this happening – especially since new President Biden’s agenda is to implement many green initiatives and this Act fits squarely into that agenda.
How to support the Act and increase the chance that it is enacted?
Govtrack gives you all the information you need to contact your congressperson by phone or other means. Here is the page for Congressman Panetta, where you can find out more contact details to voice your support for the E-bike act.
The biggest impact you can have however, is to contact your own Representative or Senator and tell them you wish for this bill to pass.
The E-Bike act is supported by the following groups and companies:
- League of American Bicyclists
- California Bicycle Coalition
- Bike Santa Cruz County
- Bicycling Monterey
- Mike’s Bikes
- Ecology Action
- U.S. PIRG
- The National Resources Defense Council
- Gazelle Bikes
- Current eBikes