Crucial Hybrid Vehicle Tax Subsidy Getting the Axe?

Although the Golden State of California has somewhat recovered since the state debt crisis that propelled Governator Arnold Schwarzenegger to the statehouse, it’s still on thin ice. And even that thin ice metaphor seems tasteless in light of the state’s ongoing water crisis. During the Governator’s reign, Schwarzenegger took a number of steps to make California a leader in the green economy. But now, state politicians are blasting a tax subsidy designed to encourage more motorists to purchase hybrid vehicles.

The tax incentive provides state subsidies to anyone driving hybrid vehicles, even millionaires driving luxury Tesla models. In response to an outcry, state regulators will now restrict the program to California residents earning less than $250,000, or households earning less than $500,000. But some state legislators say that even that reduction doesn’t go far enough.

“The state should not be diverting … taxes on low-income and middle-class families to benefit wealthy drivers,” said Bob Huff, the state’s Senate Republican leader.

In total, the program has given out about $242 million in tax rebates to drivers who buy or lease hybrid vehicles. In combination with better fuel economy, the program was supposed to get more gas guzzlers off California’s traffic-choked freeways. Although hybrid fuel economy is better than ordinary automobiles, hybrid vehicles cost more than many low and middle-income drivers can afford.

And in addition to a higher MSRP at your local dealer, there are additional financial considerations as well. For instance, the cost of replacing a hybrid battery can sometimes make potential hybrid buyers nervous. Hence, the tax subsidy encouraging hybrid vehicles.

Critics say that since there were no income restrictions when the tax break was first passed in 2010 that the program is essentially “welfare for the rich” and needs to be stopped. But for advocates of green technology, it’s worth noting that the vast majority of Californians make less than $250,000 a year.
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