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Dumbest Tax Policy Ever?

Maybe Not, But Close: Hybrid Tax Break Limited to Early Buyers.

Aren't We All "Early" Buyers?

Just as sales of hybrids and gas prices hit respective all-time highs, it looks like the largest financial incentive for buying a hybrid may be disappearing. Under the 2005 Energy Policy Act, following the quarter that a manufacturer sells it’s 60,001st hybrid vehicle, the tax credit is incrementally reduced from $2,600 to $0. The hybrid tax credit provisions of the Energy Policy Act came into effect on January 1, 2006.

The Big 3 American auto-makers have taken much of the blame for the introduction of this production cap. With Toyota and Honda having a large head start on hybrid models, domestic auto-makers sought to reduce any encouragement of foreign car sales.

According to Toyota, sales of the Prius have never been higher, and at the close of April 2006 total hybrid sales had already surpassed 50,000. Toyota is expected to have broken 60,000 sales this month.

If sales estimates are correct buyers will be able to apply for the full credit until September 2006, at which point the credit is halved to $1,300. In April 2007, Toyota hybrid buyers will only be eligible for 25% of the initial credit, or $650. Honda is expected to reach the 60,000 mark in early 2007, having already sold more than 13,000 hybrids.

President Bush has announced his support for the extension of the hybrid tax credits through the end of the year, having said “We want to encourage people to make wise choices when it comes to the automobiles they drive.” Paragraph 1