Jan. 16, 2007: USA TodayToyota: Extend Hybrid Tax Credit

Summary: "Toyota wants an extension of a federal tax credit that has delivered savings of up to $3150 to buyers of hybrid cars.

But some of Toyota’s rivals—even those that make hybrids—aren’t as enthusiastic.

Toyota, the biggest hybrid maker, is the only automaker so far to have reached the 60,000-hybrid-sales limit set by Congress in the legislation that allowed income tax breaks for buying hybrid cars as a way of encouraging fuel savings and cleaner air. The amount of the credit is based on fuel efficiency."

Having reached its limit on hybrid sales, Toyota must now try to sell them without benefit of the full credit. It’s currently worth half the original amount, which varied from $3150 for a Prius to only $1550 for a Lexus GS450h. On April 1, 2007, the credit will fall to one quarter of the original, and on October 1, 2007, the credit for hybrid Toyotas will dry up completely.

When considering whether to extend the credit, basically by removing the sales limit, several points should be examined from a public policy standpoint. What are the benefits of the credit, and who reaps them? Could such benefits be realized without the credit at all? Likewise, what are the costs of the program—and who bears that burden?

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