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Why a gas-guzzler tax break makes total sense

Consumer Reports News: August 10, 2011 03:08 PM

Conventional wisdom says that to improve passenger vehicle fuel economy, the government should incentivize the most efficient machines and raise mileage standards—as it has done. But, to take a contrarian perspective, what if we put incentives against large, gas-guzzling trucks to motivate improvements and make the vehicles affordable?

In an earlier post we looked at a paradox of fuel economy, where you actually save much more gas by winching a 14-mpg pickup up to 19 mpg than you do by swapping a 44-mpg hybrid like the Toyota Prius for the semi-electric Chevrolet Volt, which gets the equivalent of 58 mpg. This next water-cooler question is about money, and whether it makes sense to spend some in a different way.

Advanced powertrains like hybrid systems, battery-electric drive, and even clean-diesel engines are substantially costlier to manufacture than mainstream gasoline units. At the retail level, such powertrains can add $2,000 to $10,000 to the sticker price. The time to recoup that premium via fuel-cost savings can vary from a few years to practically never.

Meanwhile, the generous tax breaks once lavished on hybrid-car buyers have nearly all phased out. What remains, at least on the federal level, is a $7,500 tax credit for electric cars. That incentive is aiding the development of nascent technology that could one day play a significant role in reducing national energy independence and provide an essential alternative to fossil fuels.

But if the goal is to cut petroleum use and the means at hand is a tax subsidy, then why not subsidize gas-guzzlers that guzzle a little less? Hear us out.

General Motors, for instance, makes a credible hybrid version of its Silverado pickup truck, which we estimate should average about 19 mpg. That’s a big improvement over the 14 mpg of a typical Silverado V8. Over 12,000 miles, roughly a year’s driving, that should save 226 gallons of gasoline. Unfortunately, to get a hybrid Silverado you have to spring for a high-trim truck that costs about $7,000 more than a non-hybrid.

Today, if someone were to trade in a 44-mpg Toyota Prius for a 58-mpg-equivalent Volt, that buyer would save a mere 66 gallons of gas in a year but earn a $7,500 tax credit.

If that same tax break were extended to a hybrid pickup like the Silverado, it would make the hybrid price premium all but disappear, while saving much more fuel than swapping one fuel miser for another.

Not everyone loves big pickups, but they are used by many trades people who cannot work without them. So if we accept that full-sized pickups aren’t going away, and we’re serious about saving gas, then why not make it easier for consumers to buy a thriftier one?

It would seem with the government carrots and sticks, there could be even more incentives offered that would foster a reduction in fuel consumption. Given that large pickup trucks are one of the highest-selling vehicles year after year, despite high gas prices, those segments have great promise in their ability to reduce fuel consumption if the cost for advance powertrains could be reduced.

What do you think? Would tax incentives for more fuel-efficient big trucks be worthwhile to save more gas? Or would they just encourage more people to buy big trucks who don’t need them? Post in the comments below.

—Gordon Hard and Jake Fisher

Buyers are trading Toyota Priuses for Chevrolet Volts. Here’s what would make a bigger difference.
New fuel economy standards for big rigs, fire engines, and work trucks
Government to raise fuel economy standards to 54.5 mpg by 2025
Guide to alternative fuels
Guide to fuel economy

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