Monday, January 27, 2003

It's "Alt-Fuels on Steroids"

In an interesting and slightly-related development to this week's column, the Bush administration is not allowing hybrid cars, like the Toyota Prius, that have both gasoline and electric power, to be classified as alternative-fuel vehicles and therefore able to use the HOV lane. However, an alt-fuel SUV with a "standby" gas tank, which may never actually use that propane, is just peachy. I guess the real difference between Republicans and Democrats is how much the government should subsidize the purchase of SUVs.

The column also is available via the East Valley Tribune website. I got my editor to go along with the "alt-fuels on steroids" line for the headline.

Subsidized SUVs

East Valley Tribune, Jan. 26, 2003

Who needs Jeff Groscost when you’ve got George W. Bush?

One expensive little nugget buried in the Bush economic plan would subsidize the purchasing an expensive SUVs by anybody with a corporation at the ready. The Bush proposal would increase an existing deduction for business capital equipment from $25,000 to $75,000.

Sounds reasonable enough. Unfortunately, an obscure wrinkle in existing tax law means that Bush’s proposed increase in that deduction would be available only for vehicles classified as “trucks.”

When this particular provision first entered the Internal Revenue Code in the early 1980’s, SUVs didn’t really exist, and the idea was to encourage purchases of vehicles thought to be used to generate jobs -- namely, trucks.

Now, of course, every high-priced lawyer, doctor, and soccer mom worth her or his salt drives a SUV, taking up 1.4 times the space on the road of the average car. The Bush plan would mean that a yuppie in the 38.6 percent tax bracket who wants a fully-loaded Hummer H2 (list price $102,581) would get back $33,634 from the government in a tax refund.

Meanwhile, a business that purchased a fuel-efficient and environmentally-gentler Toyota Prius (list price $20,500) would have to settle for a refund of $3,729, same as under current law. That’s one way to keep the Saudis happy, I suppose.

Businesses that depend on cars to generate jobs but don’t use SUVs, which includes most that I see, won’t benefit much from the Bush proposal. It’s limited to “trucks” under the law, which law the Bush administration hasn’t proposed to change.

So the Bush plan means the IRS writes huge checks to people who purchase huge vehicles, but nothing new for businesses who purchase regular cars. Call it “trickle down” automotive economics.

Sound familiar? Well, it should. For those of you not able to remember or otherwise born yesterday, the Arizona Legislature, at the behest of then-Speaker Jeff Groscost, adopted a tax-credit program for purchasers of “alternative fuel” vehicles. Just as Bush claims that his SUV subsidy will help the economy, Groscost claimed his would help the environment.

But Groscost’s sloppily-drafted, last-minute legislation didn’t require that these vehicles actually run on alternative fuels, only that they carry an alt-fuels tank they might theoretically use -- or might not. And the law lacked a cap on the amount of the tax credit subsidy, meaning that the more expensive a SUV you bought, the more the state paid through the tax credit.

Before the state stopped this particular gravy train for people who believed that bigger is better whenever somebody else pays, it threatened to blow a near-billion-dollar hole in the state budget. It also cost Groscost election to the state Senate in a slam-dunk GOP district.

But the alt-fuels debacle may pale compared to the fiscal carnage if the Bush plan passes. The tax savings available to SUV purchasers on their federal taxes could easily exceed the breaks Jeff Groscost and Jane Hull doled out in 2000. It’s “alt fuels on steroids.” And Bush wants the Treasury to write those checks without the bother of adding that pesky “auxiliary” tank to that new Navigator or Excursion.

Once again, the Bush administration manages to take a bad idea and make it worse. It’s apparently not bad enough that Groscost and Hull once decided to subsidize SUV purchasers in Arizona. Now George W. Bush wants to take that idea and roll it out nationwide.

Of course, in Bush’s plan, there’s no propane involved. But it still stinks.

No comments: