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What does this have to do with preventing a financial meltdown in the global credit markets? Not much. The plug-in/EV tax credit was one of several changes made to US Treasury Secretary Henry Paulson’s original 3-page bill during a tumultuous week of market turmoil, frantic scrambling by the Administration and Congress, and intense lobbying by—it seemed—just about everybody. The bill that passed—officially known as H.R. 1424, the Emergency Economic Stabilization Act of 2008—now runs more than 450 pages.
To the provisions of the failed bill, it adds help for homeowners who have mortgage trouble, more oversight of the Treasury’s purchases of shaky assets, and executive-pay restrictions. It also includes ways that the Treasury can try to recoup any losses if it doesn’t break even on its eventual sales of the assets it will buy.
But beyond that, a number of tax breaks were bundled in as well. One provision exempts roughly 20 million taxpayers from having to pay the alternate minimum tax. The vehicle tax credits make up one subsection of the bill’s Transportation and Domestic Fuel Security Provision.
The tax credit comes on top of another piece of good news for the beleaguered US auto industry. Earlier last week, the president signed a bill making available to automakers that build cars in the US, and their suppliers, $25 billion in low-interest loans to invest in higher-mileage vehicles, equipment, and plants. That bill addressed the Detroit Three’s corporate debt, ratings on which have fallen to junk levels—meaning they must pay 12 percent or more to borrow money. That bill doesn’t give the automakers funds; the Federal Government just guarantees lower-cost loans made to them. Those guaranteed funds, however, must be used to develop and build vehicles whose fuel economy is at least 25 percent better than the vehicles they replace.