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Congress Eliminates Proposed Credits for Fuel-Cell Vehicles and Hybrids

October 26, 2004

Congressional negotiators eliminated three proposed automotive tax credits before recessing prior to the national election, reported Automotive News on October 18. The proposed credits for consumers who buy fuel-cell vehicles ($8,000) and gasoline-electric hybrids ($5,000) were thought necessary to stimulate sales; but since fuel cell vehicles aren't even available to consumers, and since hybrids have waiting lists of eager purchasers, legislators decided to drop them. Congress also rolled back a tax write-off for business people who buy light trucks weighing 6,000 pounds or more, the so-called "SUV loophole." Originally intended to help people like farmers and contractors, businesses that need big trucks, it was instead exploited by doctors, lawyers, realtors and other professionals, who used the credit to subsidize the purchase of the biggest, most luxurious and least fuel-efficient sport utility vehicles. The maximum amount a business can now deduct in one year for a new SUV is $25,000, not $100,000; however, the $100,000 write-off was unchanged for large pickups and vans used in business. Ed Cohen, vice president of government and industry relations at American Honda Motor Co. Inc., says the argument about waiting lists for hybrids is shortsighted. He noted that hybrids have a $3,000 to $5,000 cost penalty. And once the "early adopter" customers have been satisfied, hybrids and other advanced technologies will need incentives to win wide market acceptance, a position that may be true, unless fuel prices continue to rise.
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