New Hybrid Tax Credits Help GM and Ford
In 2006, the $2,000 income tax deduction that buyers of hybrid vehicles could claim in previous years will be upgraded to a tax credit of $250 to $3,400.
Fool.com's Rich Smith writes:The difference in wording is even more important than the difference in numbers. A tax "deduction" is just that: the amount you deduct from your taxable income before calculating the tax on that income. For example, if you're in the 35% tax bracket, a $2,000 deduction is worth about $700 to you. The lower your tax bracket, the less a deduction is worth. In contrast, a tax credit is like a cash rebate toward whatever taxes you owe. Owe $3,000? Got a $3,000 credit coming to you? Poof! Now you owe no taxes.Good for Toyota and Honda, right? Smith points out that the tax credits are not without limit: The first 60,000 buyers of a manufacturer's hybrids can claim the full credit. After that limit is reached, the credit begins to phase out.
Meanwhile, Ford and GM, which have minimal hybrid sales, should be free to sell as many credit-worthy hybrids as they like for the next two or three years. Among penny-pinching car buyers, at least, the tax credit will work to help bridge the hybrid market-share chasm that separates Detroit from Tokyo.I believe that every one of the projected 100,000 buyers of Toyota hybrids this year should be allowed to claim the full credit. It's neither their nor Toyota's fault that GM and Ford have been asleep at the wheel for the first half of this decade.
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I wish that Toyota purchasers were treated as fairly as GM and Ford – as you say, it isn’t Toyota’s fault, nor their customer’s fault, that GM and Ford were remiss.
In fact our esteemed politicians were trying to “help out” GM and Ford by doing the tax credits this way.
In fact, I don’t think that Toyota sales will taper off after the tax credits are gone – for the simple reason that people are buying quality more and more, which leaves GM and Ford out of the equation.