Make Tax Cuts Permanent... For Hybrid Car Buyers

The idiocy category is reserved for the mind-boggling fact that Washington has quietly ended the one energy independence-type of subsidy that has proven an absolute success -- the tax credit given to all consumers who purchased the most fuel-efficient cars, writes Martin Schram in this oped piece.

Published: 30-May-2007

In a capital city awash with the pronouncements of great goals and grand intentions, we sometimes overlook the fact that idiocy also abounds.

You can find it sometimes in the front-page headlines and sometimes in the fine print of government regulations and subsidies. Today we will look at both varieties. They are co-existing in hybrid fashion, you might say (and we are saying, because this will ultimately be about hybrid car subsidies) amid Washington's perennial promises of achieving energy independence and combating global warming.

We begin by coloring-by-the-numbers: Just days after New York City's mayor impressively decreed that all of the city's yellow cabs must soon be green (as in hybrid engines), his hometown New York Times led Tuesday's paper with the news that black coal is also going green. Actually, black coal is going two shades of green.

Environmentally Greener Coal: Even as the Congress is shaping new curbs on greenhouse gases that cause global warming, the coal industry has mounted a major campaign to win congressional approval for new federal subsidies, guarantees and loans. They are being sought to produce a new, coal-to-liquid fuel that is being touted as an alternative energy source that will vastly reduce greenhouse gases produced by traditional coal.

Politically Greener Coal: In the last two years, the coal industry has reportedly tripled the amount of money it has put into another form of investments, investing $6 million in politicians, in the form of money for their reelection campaigns. Former House Democratic Leader Richard Gephardt of Missouri has been hired by Peabody Energy to push the liquefied coal plan.

But, it would be wrong to call this a Washington idiocy, despite the fact that recent studies show liquefied coal will be hugely expensive, and despite the fact that it is happening as Democratic congressional leaders vow to curb greenhouse gases. So far, it is just a Washington incongruity.

The idiocy category is reserved for the mind-boggling fact that Washington has quietly ended the one energy independence-type of subsidy that has proven an absolute success -- the tax credit given to all consumers who purchased the most fuel-efficient cars. In fact, the Congress, in its lack of wisdom, wrote the tax credit law specifically so that it would be phased out for the cars that were most successful -- at the very moment when they were achieving this success in the name of America's energy independence.

The reason all of this happened is that two Japanese car manufacturers -- Toyota mainly, followed by Honda - had the vision and the guts to invest their money in their own efforts to develop hybrid car technology. America's so-called Big Three -- General Motors, Ford and whatever is to be the next incarnation of Chrysler -- lacked the vision and fiscal fortitude to keep pace. But America's Big Three invested sufficiently in political Washington. Thus the Congress wrote into the law that gave tax credits based on each car model's fuel efficiency (beginning in 2006), a provision that sharply reduced and then eliminated the tax credits once the car manufacturer sold 60,000 of these most fuel-efficient cars.

This has so far affected only Toyota, maker of the Prius (a mid-sized car that gets a whopping 60 miles per gallon in the city and 51 miles per gallon on the highway). At its peak, Prius buyers got tax credits of $3,150; now they get just $787.50. Camry and Highlander hybrid buyers got $2,600 tax credits; now they get just $650. After Sept. 30, they will get no credit at all. Meanwhile, buyers of hybrids from the other car makers, who are just catching up will still get their tax credits, even though their so-called mild hybrids are no gas-savers in the league of the Prius.

So America's tax cut subsidy rewards those who buy cars that do somewhat less to promote America's energy independence. Which is why I view it as a tax subsidy only a lobbyist could love.

But wait: This is a tax cut even liberals should love. And it is one that conservatives surely should see as a philosophic, market-based, national security win-win.

So it's time for the politicians to invest in the people who put them in office. Take a step toward beefing up America's national security by reducing U.S. dependence on imported oil. Make those tax cuts permanent for all hybrid car buyers, every year. Take the high road to U.S. energy independence.

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