USA: Government tax breaks favours SUV buyers at hybrids' expense
The US government would still prefer that drivers climb behind the wheel of a fuel-quaffing SUV than a hybrid, given the disparate tax incentives, CBS Marketwatch reported.
The report said that, under current federal law, taxpayers buying hybrid vehicles like Toyota's popular Prius or the recently unveiled Ford Escape are awarded a one-time tax deduction of $US1,500, down from $2,000 in 2003.
As it stands now, the deduction will drop to $1,000 next year, then to $500 in 2006 before being phased out altogether by 2007, the report added.
In contrast, current policy allows small business owners to deduct up to $100,000 of the purchase price of trucks that weigh at least 6,000 pounds, more than twice the weight of a Prius, CBS Marketwatch said.
Originally intended to help farmers and small businesses to buy work and delivery trucks, the rule is easily skirted by consumers as a means of discounting expensive SUVs, the report added.
But with plenty of bipartisan support, tax breaks for the electric- and petrol-powered cars won't be going anywhere, according to Kateri Callahan, president of the Alliance to Save Energy, a lobbying group based in Washington, DC.
"Tax incentives for hybrids that are in place right now will not be allowed to sunset in 2006. They will most likely be kept as robust or even more than they are right now," she told CBS Marketwatch.
Both president George W. Bush and his Democratic challenger, Senator John Kerry, propose that hybrid car buyers reap even higher tax write-offs of up to $5,000 and $4,000, respectively but the expected increase in hybrid tax breaks solves only part of the problem, according to critics who reportedly argue that something needs to be done about the controversial tax advantages reserved for buying sport-utility vehicles, like the Hummer.
"Why is the Bush administration giving a $100,000 tax deduction to the biggest gas guzzlers on the road, and letting the $1,500 tax deduction for fuel-efficient hybrid cars to phase out?" Sierra Club representative Brendan Bell asked CBS Marketwatch. "The administration is telling car buyers that if they choose the vehicles that add the most to the country's oil dependence, taxpayers will pick up the tab."
Taxpayers for Common Sense, a self-proclaimed "nonpartisan budget watchdog" based in Washington, DC, reportedly is incensed with what it deems a huge waste of taxpayer money. The group estimates that the "SUV loophole" will cost Americans at least $1.3 billion over the next 10 years.
While efforts to extend tax breaks for hybrid car buyers are poised to bring results, attempts at tinkering with the SUV tax rule have made little headway, CBS Marketwatch said. Keith Ashdown, vice president of policy and communications at the taxpayer advocacy group, said the chances are very slim that anything will be done in the near term to fix the "egregious, inequitable provision," regardless of who is president.
"It's totally in flux," he reportedly added. "Nobody likes taking something like this away from the people without replacing it with something else."