This morning, during my typical breakfast of Paxil and scotch, I was slogging through reports on the Important Issues of the Day on Google News (Michelle Wie's second-round score, a new analysis suggesting that the Donner Clan were NOT, in fact, cannibals) when I tripped over the following puff piece buried under the snow jobs. Literally. I think I may have a high ankle sprain. My ankles ARE usually pretty high after breakfast.
Anyway, over the past year, I've made the suggestion several times in letters to my congresscritters and comments on blogs, that the Federal Government should offer a program of tax credits for purchasers of high-mileage vehicles such as hybrids to help reduce US gasoline consumption. Well, DAMN! They've already done that. Sort of.
Buried in last August's Energy Bill (aka, the "Healthy Oil Industry Initiative") was a provision to offer tax credits, beginning Jan. 1st 2006, of "up to $3,400" for the purchase of a hybrid vehicle. However, the tax credit will not apply to hybrid vehicle models that have sold 60,000 units - a number that the Prius will achieve by sometime this spring. Gee, I wonder who insisted on THAT, condition (coughUSautomakerscough)?
Short LA Times piece here.
Of course, there are other hybrid models to which the tax credits would still apply. Honda has a couple available, Toyota also makes the Highlander, and even Ford is offering hybrid versions of the Escape and the Mariner (SUVs, of course) on which buyers could get a tax credit of "as much as $2,600."
While every little bit helps, I suppose, this program is not likely to incite a stampede to purchase higher-mileage vehicles. As a spokesperson for JD Power pointed out, "People still tend to determine what car to buy based on their monthly car payment. They would not see any of the tax credit until at least April 2007 when they file their return," while speculating that hybrid sales in the US market might jump to as much as 280,000 units (up from 212,000 in 2005). That's out of over 16 million vehicles sold - a sneeze in a snowstorm.
By the way, there's also a 2005 Federal income tax deduction available to folks who purchased certain hybrid models prior to Dec 31 2005 of "up to $2,000" - even if you don't itemize. Check it out here. Note that this is a tax deduction, not a tax credit. For those of you who are still groggy from Friday night frivolities or who already may be halfway through your third Vicodin-and-Sambuca milkshake, the difference is that a deduction only reduces the amount of your taxable income while a tax credit is deducted directly from the taxes you owe. This new 2006 program is a tax credit.
There's also, evidently, a tax credit of "up to $4,000" available on the purchase of a "fully electric" vehicle (see here).
According to CNN-Money (addressing the "up to $x,xxx" issue),
The amount of the credit for each vehicle is based on three factors:
First, how large is the vehicle? The amount of the credit is based on the vehicle's fuel economy as compared to a similar 2002 model-year vehicle. To get any credits at all, a vehicle must get at least 25 percent better fuel economy than a similar 2002 vehicle.
A vehicle could also get a smaller credit if it is estimated to save at least 1,200 gallons of fuel over its lifetime.
Vehicles also must meet certain emissions standards to qualify for a tax credit. Regardless of their fuel economy, no diesel vehicles currently meet the emissions requirement for a tax credit.
The article also notes that ". . . no diesel vehicles will get tax credits in spite of the fact that some get extremely high gas mileage, according to an analysis by the American Council for an Energy Efficient Economy." (Harrumph!) However, evidently the tax credit also applies to some other non-hybrid, high-mileage vehicles such as the natural gas powered Honda Civic GX (only available in California).
The article also lists some of the vehicle models covered and the "likely" tax credits that apply:
Toyota Prius (hybrid) = $3,150
Honda Civic GX (natgas) = $3,600
Ford Escape/Mariner (hybrids)
front-wheel drive = $2,600
FOUR-wheel drive = $1,950
Chevy Silverado ("hybrid") = $250
Honda Insight (hybrid)
automatic transmission = $1,450
manual transmission = $0
(doesn't meet emissions standards)
Hybridcars.com has some more specifics here.
Also, you can find a whole slew of other articles about this by Googling [hybrid tax credit].
Anyway, I'll be contacting my Congresscritters shortly to congratulate them on a damn fine idea and a step in the right direction. But I'll also be suggesting that the program should be expanded to offer a tax credit (of, say, $5,000) for any vehicle trade-in transaction, even on the purchase of an ordinary gasoline-powered vehicle, that results in a net gain of at least 10 miles per gallon. There are about 230 million vehicles on the road in the US, about half of which are SUVs and light trucks that get 20mpg or less. If we could get half of those replaced with vehicles that get even 30-35mpg, we'd reduce US gasoline consumption by about 10%. I'll also suggest that the tax credit, or some significant portion thereof, be issued in the form of an immediate rebate check so that consumers would have the savings in their pockets right now instead of having to wait a full year. Such changes actually might incite a stampede into auto-dealer showrooms and would likely have a significant positive impact on the economy, especially the manufacturing sector.