Monday, December 6, 2010

How The Gas Tax Is Under Threat From Green Vehicles

by Paul Eisenstein

Live in the right part of California and work for the right company and you might be able to buy the new Nissan Leaf for as little as $12,500, as Autoblog has reported, due to the raft of incentives that are available for buyers of the little battery car and other high-mileage, low-emission products.

In recent years, lawmakers have been racing to come up with incentives designed to encourage motorists to migrate to clean, efficient vehicles. It's a clearly noble effort, but one that deserves a closer look in an era of fiscal restraint.

Several states are looking at a more direct form of taxation: a per-mile usage fee on battery-based vehicles.
The feds, and most states offering such incentives, have put caps on their zero-emission incentive programs, and most will vanish by mid-decade. But, ironically, if these programs do what they're intended to, the fiscal impact could be felt for years to come. It turns out that going green could plunge state and federal balance sheets into the red.

The short-term costs are already potentially significant. At the federal level, a $7,500 tax credit could drain billions of dollars a year out of the Treasury if major automakers come even close to their battery car sales targets by mid-decade.

Such cash incentives – along with other perks, such as access to California's HOV lanes – are designed to motivate the move to vehicles like the Leaf and the new Chevrolet Volt. Once momentum starts building, these givebacks can be phased out, proponents contend. But they're missing a big part of the picture.