As they cast about for new taxes to help fill a multibillion-dollar budget hole, Democratic lawmakers in Olympia have turned to a politically convenient target: Tesla, the electric-car maker run by billionaire Elon Musk.
A bill advancing in the Legislature would apply a new tax on lucrative emission credits Tesla has banked under a state policy phasing out sales of new gas-powered cars by 2035.
Backers say House Bill 2077 would claw back millions of dollars in unintended “windfall profits” for Tesla, which has amassed credits it can sell to other car companies as the state ratchets up costs on gas-powered car sellers.
But critics say the late-emerging bill is thinly veiled retribution against Musk, the Tesla CEO who has emerged as a leading villain for Democrats in his role heading Trump’s government-slashing Department of Government Efficiency, or DOGE.
“What Donald Trump is doing to Harvard, this bill does to Tesla,” said Todd Myers, vice president for research at the Washington Policy Center, a conservative think tank, comparing the legislation at a public hearing last week to the president’s assault on elite universities.
The bill’s chief sponsor, House Majority Leader Joe Fitzgibbon, D-West Seattle, denied in an interview that the bill is intended as political revenge against Musk.
He said the data on Washington’s fledgling car-emission credits shows “one outlier” who is “very profitable,” referring to Tesla, which has built up most of the credits under the state’s program.
“I don’t care who the CEO is,” Fitzgibbon said.
However, Fitzgibbon argued additional taxes are needed by the state, in part due to abrupt shut-offs of federal funds. He cited roughly $100 million in federal grants that have been frozen for building and repairing electric car charging stations.
“We didn’t have a budget crisis until this year. And we didn’t have the federal government revoking huge amounts of federal dollars for EV infrastructure,” he said.
The fight is shaping up as Tesla’s image has cratered among Democrats angered by Musk’s leadership of DOGE, which has sent a strike force of young tech workers into federal agencies to dictate budget cuts and firings. Some of those actions have been temporarily blocked by federal courts, who have ruled them potentially illegal or unconstitutional.
Musk, the world’s richest person, has taken apparent delight in eliminating foreign aid, public health research and other entire categories of federal spending. Meanwhile, he has frequently spread conspiracy theories about immigrants on X, the social media company formerly called Twitter, which he bought in 2022.
Tesla’s sales have taken a hit, reporting a 71% drop in profits for the first three months of this year.
Regular protests have been held at Tesla dealerships locally and across the country as critics seek to hurt Musk’s bottom line. Many Tesla owners in wealthy liberal cities like Seattle have tried to offload the cars or sheepishly affixed bumper stickers declaring they’d bought them “before we knew Elon was crazy.”
Washington’s move to phase out gas cars has been in the works for years, following the state’s decision in 2020 under former Gov. Jay Inslee to follow California’s tough vehicle emission standards.
In 2022, the state Department of Ecology updated its clean vehicles rules to require all new cars sold here by 2035 to be electric, hydrogen-fueled or hybrids.
That requirement will unfold in stages. By next year, 35% of new cars sold in Washington must meet those requirements. But carmakers who sell more gasoline-powered cars can make up for it by purchasing credits earned by companies like Tesla, which sells only electric vehicles.
HB 2077, which seeks to tax those credits, was introduced in mid-April and fast-tracked by Democrats. It passed the state House eight days after being introduced, on a mostly party-line vote. It’s now in the state Senate, with a Ways and Means Committee vote scheduled for Friday.
The bill would apply a 2% tax on sales of the emissions credits and a 10% tax on the value of banked credits. It has exemptions for companies that hold relatively few credits, so the tax burden would fall mainly on Tesla.
A legislative fiscal analysis estimates the tax would raise $78 million in the 2025-27 biennium and roughly $100 million a year after that. The measure would initially devote 70% of the money to the state general-fund budget, with the rest going to help pay for electric car infrastructure.
At the public hearing last week before the House Finance Committee, backers of the tax, including union and social service advocates, said it will help stave off cuts to needed state government services.
Maggie Humphreys, with the liberal advocacy group MomsRising, said lawmakers should support such proposals to “tax windfall profits and wealth” to pay for schools, child care and other needs.
Opponents said the tax would cut into the incentives designed by the state to boost electric car sales.
Jeff Gombosky, a lobbyist for Tesla, told lawmakers the proposal “runs counter to the intent” of Washington’s zero-emission vehicles policy.
Troy Nichols, a lobbyist for the electric car manufacturer Rivian, a Tesla rival, said while the tax would only have a “modest” impact on the company, it risks undermining the principles of the state’s electric-vehicle mandate.
One environmental group also chimed in with concerns.
Kate White Tudor, a lobbyist for the Natural Resources Defense Council, told lawmakers the tax credits banked by Tesla are part of the design of the state’s law, not an unintended consequence.
“We worry it sets a dubious precedent,” she said.
The Tesla tax is still up in the air with just days to go in the legislative session, but Fitzgibbon said it remains very much on the table in final budget talks.
He said the tax would not prevent Tesla from earning a profit, but said the state is under no obligation to help the company pad its bottom line.
“That’s the kind of thing legislators take an interest in,” Fitzgibbon said. “Is it serving the interest of the public for this asset to be untaxed?”
