My Hybrid Will Break My Tax
February 1st, 2006
By Archived Story
A lot of people would love to save money and help the environment at the same time. Anyone who has ever considered going vegan, thought about buying a hybrid vehicle, or had to pay to recycle knows that thriftiness and earth-friendliness are not always compatible. Wouldn’t a little incentive be nice?
Last year our government agreed on a set of rules regarding energy policy in the United States in an attempt to combat the growing energy crisis. Like many other components of the Energy Policy Act of 2005, this year the Hybrid Tax Credit has gone into effect.
The small “Alternative Motor Vehicle Credit” section of this complex bill is dedicated to granting tax credit to people who buy hybrid cars in 2006. People and businesses that buy brand new motor vehicles that obtain at least part of their power from fuel cells are eligible to receive up to $3,400 in tax credit.
Tax credit for buying a hybrid car sounds promising, but this administration’s record on environmental policy is less than stellar. Like all environmental policies, this one has some drawbacks.
The amount of tax credit people receive is computed using two numbers. As seen on tables written into this energy policy, the two factors are how much fuel the car saves over time (conservation credit) and the fuel economy percentage for its weight class. The most generous tax credits are given to vehicles that score the best on these evaluations. The American Council for an Energy Efficient Economy (ACE3) calculates that the Toyota Prius generates the most tax credit at $3,150, while the Honda Accord Hybrid only receives a $650 tax credit. In other words, for most people this tax credit will not be enough to make an expensive hybrid car worth the cost, even if they save money on gas as well.
If someone is interested in lowering their regular income taxes by using this credit they need to buy their hybrid soon. Another one of this bill’s limitations is its phase-out. The dollar amount of the tax credit will begin to shrink after a manufacturer sells 60,000 qualifying vehicles.
The Hybrid Tax Credit sounds like a good start. It is a way to get more people interested in hybrid cars, but is this enough to encourage the average person to go green? Not too many people I know can afford to shell-out big bucks on a car in hopes of a large tax credit. The 2006 Toyota Prius can cost around $25,000. If low-emission vehicles are really going to make a difference, they need to become available to the masses.
Everyone knows that natural resources are running out and that pollution is causing global warming. Giving tax credits to a few is a small step. Small steps are an attractive way for our country to change, but small steps take time. If tax credits are the beginning of our walk toward sustainable energy, then we have a long way to go before we are self-sufficient and significantly cutting industrial emissions.
Our government has not ratified the Kyoto Protocol because of possible economic consequences, and because of that it seems unlikely that any energy or earth saving policies they come up with will be as productive as they could be. It would be great if the Hybrid Tax Credit caused millions of people to rush out and buy hybrids, but it would be even better if environmental policy was not the solely determined by money.
