Originally published November 27 2005
Tax credit for hybrids favors large vehicles
by Mike Adams, the Health Ranger, NaturalNews Editor
The Energy Policy Act has changed the tax credit given to those consumers who purchase hybrid vehicles, but the formula that the change is predicated upon favors large vehicles like SUVs.
Although the IRS has not finalized the exact amount of incentives for each vehicle, the nonprofit group the American Council for an Energy Efficient Economy, or ACEEE, developed a table that estimates the likely tax credits for each vehicle model based on the formulas describe in the legislation.
The table shows that on average SUVs receive a higher tax incentive than the most fuel-efficient cars on the market.
People who buy the 33-mpg Toyota Highlander Hybrid, for example, get a $2,600 write-off -- nearly twice the $1,450 tax credit for the 57-mpg Honda Insight.
The odd math is an artifact of a two-tiered tax credit that's based in part on how fuel efficient the car is compared to the average consumption of vehicles of similar weight, according to Jim Kliesch, a vehicle analyst with ACEEE.
For this reason, the Honda Insight receives less credit than the similar performing but heavier Toyota Prius.
For example, increasing the gas mileage of an SUV from 14 to 16 miles per gallon saves the same amount of gasoline (134 gallons) in a year as boosting the fuel efficiency of a passenger car from 35 to 51 miles per gallon, according to Kliesch.
The tax credit is cut in half for each manufacturer three months after the company sells a total of 60,000 hybrids.
For example, if Toyota sells 60,000 Highlander and Prius hybrids by March of 2006, then in July the tax credit is cut in half, and goes down to 25 percent in January of 2007 before ending in June.
Toyota spokeswoman Nancy Hubbell said she does not believe the tax credit limit is unfair, but said the company may have trouble meeting demand if consumers rush to buy hybrids early in the year to make sure they receive the full credit.
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