One of the hot news items the past few days has been the hybrid tax credits available to buyers of hybrid vehicles. They were increased in value for 2006, to as much as $3400, so everyone is recommending you should run out and buy a hybrid to pocket the money. Let me jump in here and say the credits are a bad
idea, more than that, they are misleading and counterproductive.
Looked at solely from the perspective of getting the cash, sure, go for it, except you won’t see it until you file your taxes in 2007 so it’s a bit down the road before you’ll spend that money. The other interesting aspect is that it only works if you are among the first 60,000 buyers of any one company’s hybrid vehicles and since Toyota sells far more Priuses than that, you’re out of luck if you wait.
So, let’s look at this incentive a little closer.
First, any incentive from the government is supposed to encourage people to do something they would not otherwise not do, yet the fact that you have to hurry to get it because so many people are already doing it shows the goverment is a bit late to this party and simply throwing politically popular money around where it’s not needed.
Second, the amount of the benefit is based on how much gas the individual vehicle saves over a conventional version of the same vehicle, seems logical, right? Think again. Suppose you buy a little hybrid version of a car that gets 40mpg compared to 30mpg in a non hybrid version, 10 more mpg, saving lots of gas right? Suppose you have a truck that gets 10mpg and a hybrid version gets only 12mpg. Still terrible right? Do a little math. For any given number of miles driven, the truck saves far more gas than the little car. If you’re a fellow that needs a truck for your business you can’t just stop driving so you get a hybrid truck. If you drive 15,000 miles per year, the old truck used 1500 gallons while the hybrid used 1250 gallons, a saving of 250 gallons. The little hybrid car in 15,000 miles uses 375 versus 500 gallons, a saving of only 125. The car saves half as much gas as the truck. Yet the tax incentive penalizes the truck and rewards the car. So we subsidize the soccer moms and movie stars and people who are just so very green, even though they are saving less gas while penalizing the guys out doing things like going to work and building our country and saving more gas. Good move.
Third, an incentive is simply the government and its bureaucrats declaring a winner in the higher efficiency race while punishing other possible methods of saving gas or improving efficiency that don’t have incentives to promote them. Of course we can just give incentives to everyone, right? Well, why not stay out of it and let the market declare a winner, that way we don’t get into incentives and credits and all of the extra tax calculations and inevitable fudging that goes on. The government just can’t keep its nose out of things that are happening anyway. Incentives didn’t start the hybrid car market, they aren’t needed to keep it going or make it grow.
Fourth, the CAFE numbers all of the incentives are based on are being revised because all the those hybrid buyers are finding out their cars get a lot fewer miles per gallon than the window sticker said. So are we giving incentives to undeserving people? Are we not giving incentives to people that should get them? Geez! Forget incentives.
Incentives make people feel good while actually hurting the goal they are intended to promote (in this case, saving gas) while making it more difficult for other ideas to make it to market. Of course, those in favor of incentives know most folks don’t think things through, they certainly don’t do the math, and swaying opinion by pushing government incentives is an easy vote getter. Makes a guy a bit twitchy just thinking about it.