To Boost Gas-Free Car Sales, Make $7,500 Tax Credit a Rebate

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Cash for Clunkers banner with Mercury Sable, Albany, New York

Cash for Clunkers banner with Mercury Sable, Albany, New York

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Speakers throughout today's Electric Drive Transportation Association conference agree: Plug-in electric cars that use little or no gasoline are coming. It's no longer an "if", it's now a "when."

To help boost early adoption of cars that run mostly or entirely on grid power, the Federal government offers tax rebates of $2,500 to $7,500 to private buyers of those cars.

Kevin Czinger, Coda Automotive CEO & Brian Wynne, EDTA President

Kevin Czinger, Coda Automotive CEO & Brian Wynne, EDTA President

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2010 Toyota Prius Plug-In Hybrid, 2009 Los Angeles Auto Show

2010 Toyota Prius Plug-In Hybrid, 2009 Los Angeles Auto Show

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Volt Line Director Tony Posawatz

Volt Line Director Tony Posawatz

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2011 Nissan Leaf prototype

2011 Nissan Leaf prototype

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From credit to rebate

Several speakers begged the Feds to change that subsidy to an outright rebate, similar to this summer's Cash-For-Clunkers credits. Those were outright reductions in purchase cost for buyers who traded in old, low-mileage vehicles for new, more fuel-efficient vehicles.

The idea is that not every buyer may have enough income to use the maximum credit of $7,500, whereas a direct rebate of the same amount would apply across the board.

Less paperwork, immediate impact

More importantly, it would cut the retail price of the car at the time of purchase, rather than coming a year after the fact, not to mention after completing tax paperwork.

The idea was broached at the conference by former New York governor George Pataki, now a lawyer in private practice. Market demand will spike, he said, if the tax credit were converted to a rebate.

The concept, and its impact, was heartily endorsed by Kevin Czinger, CEO of electric-car maker Coda Automotive.


He said a $7,500 direct purchase rebate would be "transformative" and "put vehicles in range" for a wide variety of buyers, bringing the price of Coda's compact electric sedan to "the low thirties".

"We believe that single step," Czinger said, "would accelerate adoption of electric cars" and jump-start the U.S. transition to gas-free vehicles.

Beside the 2011 Coda Sedan, other vehicles eligible for tax credits from $2,500 to $7,500 are the 2011 Chevrolet Volt, the 2011 Nissan Leaf electric car, and the 2012 Toyota Prius Plug-In Hybrid.

Little chance of happening

As clean and effective as the idea may be, though, its chances of enactment may be low.

Tony Posawatz, vehicle line manager for the 2011 Volt, suggested that because the tax-credit mechanism already existed, there was little legislative appetite to design and enact a new mechanism for direct rebates on vehicle sales.

Clunkers challenges 

He pointed to the operational challenges of this summer's Cash-for-Clunkers bill.

A few dealers are still cleaning up remaining paperwork issues, and it was clear that the Federal government was initially overwhelmed by the paperwork processing issues and dealer demands for timely reimbursement for the hundreds of thousands of rebates issued in just a few weeks.

The revenue impact to the government is pretty much neutral, though the funds would be spent slightly quicker with a rebate than with tax credits (because not all buyers qualify).

Your thoughts?

So what do you think? Should the tax credit become a rebate? Give us your opinions in the comments, below.

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Comments (6)
  1. As a consumer, how could you argue against a direct purchase rebate? The initial EVs are all very expensive when compared to the average gasoline powered car. For an average buyer, a rebate is the only way to make it an economical choice. I would estimate that the one and only reason an average consumer wants an EV or Hybrid is for savings at the pump (or to never have to visit the pump). With the economy as it is, a lot of consumers can't wait for a tax credit. It would need to be an immediate price chopping rebate. Otherwise I'll be buying another subcompact hatchback like the Yaris.

  2. I have to agree that a rebate at time of purchase is the ideal way to handle this "refund". Tax rebates will take as much as a year and instant rebates will bring the financing of the cars back to a level that most consumers can handle. Too, you may not be able to determine how much your actual tax rebate will be until after your taxes have been completed at the end of the year. The only advantage I can see with the current program is that the federal government could be putting and extra $7500 in consumers hands that may use it to pay off existing debt or spend it maybe helping the ailing economy.

  3. A direct purchase rebate is much easier for the consumer than going through the tax system. If the goal is to get more cash to the consumer, and reduce the actual price of the car, the sooner the buyer can see the "net" price of the vehicle the better.

  4. I'd love to get a Volt, but unfortunately the dealers seem to be stuck in the 60s when it comes to being helpful & informative, (see the movie "Tin Men" for a sample of 60s sales philosophy).
    I called three Chevy dealers here in the SF Bay Area and got widely varying & vague responses on when I could get a Volt -- "maybe in July" was about as specific as I could get. Also, none of them could give even the faintest idea of how the $7500 federal tax credit works. Is it a $7500 deduction off of taxable income -- which would result in an actual tax savings of at most around 30% or about $2500 -- or is it an actual reduction in tax owed, which would be a true savings of $7500. "Consult your tax adviser" was the universal response.
    Given that this is a huge selling point for these cars, why can't Chevy train its sales people to give a straight and simple answer to this question? I do have an accountant, but it's not his job to sell Chevy Volts.

  5. I don't really care how it is packaged for the buyer -- my problem is, very simply, that AS AN AMERICAN TAX PAYER, I DON'T WANT TO PAY $7500 WORTH OF SOMEONE ELSE'S CAR. I am currently driving a $400 (no I didn't mean $4000 or $40000) Buick Regal, and if I could afford a better car, I would be at a dealership at this very moment. But the Federal Government apparently believes that I shouldn't get to choose where my meager paychecks go -- because their need to promote a great new car (far ahead of the curve supported by current consumers) is much more important than my ability to feed my children. Don't tell me that this week, the environment trumps my pantry. This is about taking decisions away from consumers -- not empowering them.

  6. Simpler and clearer communication is always the goal of a good post, and your efforts are great. Thanks again.
    car hire

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