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June 21, 2006


"This article left me with one question, though: who, exactly, was responsible for this cap? Which representatives put it in?"

Color me surprised when someone from Michigan turns up.

I'm glad I'm getting my new Prius in a week or two.

There's a principled argument to be made that a cap could incentivize manufacturers to get into the hybrid market, without creating what amounts to a permanent subsidy for all hybrids.

The reason this cap failed to accomplish its goals doesn't seem to be the mere fact that there's a cap, since these manufacturers did, in fact, build hybrids. The real problem seems to be that "hybrid" wasn't very well defined, such that a Silverado getting 16 mpg qualifies just because it uses hybrid technology. Our goal is not just more hybrids, but more fuel-efficient hybrids; so we ought to design tax policy to move us towards that goal.

hil: Thomas (the site for Congress) posts the CRS (Congressional Research Service) Summary for each bill. The summaries are supposed to be non-partisan analyses of each clause of each bill.

I haven't used CRS Summaries all that often in my career, but when I have and compared them to the bill itself I have found the summaries to be fair and accurate.

Remember the electric-car fad in California?

There are at least some people who don't think that was just a fad that fizzled.

"Thomas (the site for Congress) posts the CRS (Congressional Research Service) Summary for each bill."

And, not remarkably, it's here. Links really help. Not linking is not so good.

I always thought a particularly sensible piece of legislation would be a tax credit or rebate that was scaled based on the CAFE standard -- but I'd quite deliberately include "light trucks" in and scale them to the car CAFE standard, to avoid the SUV loophole.

For every mpg over the CAFE standard you got, you got a X dollars in credit. So if you got a car that did 30mpg better than the CAFE standard, you'd get twice the credit a car that did 15 over the CAFE standard.

If you really wanted to get nasty, add a tax that worked in reverse -- score UNDER the CAFE standard, and you paid extra in tax for each mile per gallon under the standard your car scored. (All of this for new cars only, not used).

Whenever you bumped the CAFE standards, allow a grace period of one year before the rebate changed -- but the rebate would scale automatically.

Here comes the CRS summary of the bill. I won't blockquote, in an effort to make this less horribly long than it already is. Everything after this para. is their summary, though. (Thanks, Francis!)

"Vehicle and Fuel Choices for American Security Act - Instructs the Director of the Office of Management and Budget to publish in the Federal Register an oil savings target and action plan for specified calendar years.

Amends federal transportation law to direct the Secretary of Transportation to develop a national tire fuel efficiency program for passenger cars and light trucks.

Directs the Administrator of the Environmental Protection Agency to develop a national testing and assessment program to determine the fuel economy of heavy duty vehicles.

Instructs the Secretary of Transportation to: (1) prescribe average heavy duty vehicle fuel economy standards; and (2) conduct a research and development program for electric drive transportation technology.

Directs the Secretary of Energy to establish a lightweight material research and development program.

Amends the Energy Policy Act of 2005 to direct the Secretary of Energy to accelerate efforts to improve hybrid technologies.

Amends the Internal Revenue Code (IRC) to allow an advanced technology motor vehicles manufacturing tax credit.

Terminates the limitation on the number of qualified hybrid and advanced lean burn technology vehicles eligible for the alternative motor vehicle credit.

Directs the Secretary of Energy to issue regulations requiring that by FY2016 each federal agency achieve at least a 30% reduction in its fleet petroleum consumption.

Amends the IRC to: (1) establish a fuel-efficient tax credit for private fleets; (2) subject heavy vehicles to the depreciation limitation for certain luxury automobiles; and (3) increase the alternative fuel vehicle refueling property credit.

Prescribes fuel efficiency requirements for automobiles sold in the United States for specified model years.

Amends federal transportation law to establish the Alternative Fueling Infrastructure Trust Fund.

Amends the Clean Air Act to prescribe minimum annual quantities of renewable fuel from cellulosic biomass and sugar.

Amends the the Consolidated Farm and Rural Development Act to direct the Secretary of Agriculture to establish a low-interest loan and grant program for farmer-owned ethanol producers to develop infrastructure, including pump stations, for the retail delivery of any fuel containing at least 85% ethanol.

Amends federal transportation law to direct the Secretary of Transportation to develop a program to designate Transit-Oriented Development Corridors.

Directs the Secretary of Energy to conduct a national media campaign to decrease oil consumption in the United States over the next decade."

I posted an update, including a site where you can easily send emails to your Congresspeople about these bills.

There is nothing more abused in the Internal Revenue Code than tax credits. Any tax credit available to a corporation will almost invariably find its way to the corporation who pays the highest marginal tax rate, regardless of whether that corporation does anything remotely related to what the tax credit was intended to encourage.

The EITC, which is in theory a good idea, likely pays out more $ in fraud than to the working poor (generally because the IRS is set up to detect understatements of income, not overstatements).

As to the cap on the # of hybrids per manufacturer, one would think that that would not be to hard to get around, though I have not read those Code provisions lately and the linked to article does not cite one (anyone know which one it is)? The CRS summary will not do, unfortunately.

"I posted an update"

I remain a huge fan of date and time posting updates, for the usual reasons one does the same for posts and comments.

This is just me, as usual, talking about what I think are good blog practices, hoping to convince others that they are. I think the more info we give readers, the better. I think that letting people know when a post has been updated avoids unnecessary confusion, in a bunch of possible arguments.

Weeks or months from now -- and we see folks posting to such old posts here all the time (I also believe in closing comments after a couple of months, but that's another rant) -- people will not know if the update took place two minutes or two hours or two days or two weeks or two months, later.

Again, just me. Working to make the blogosphere a better place®.

Ugh: lucky (or unlucky) you asked one of the few people in the universe who has these facts at her fingertips, not having yet closed all the tabs I opened while researching this. So: the energy will is here. You want sec. 1341, and specifically part (f) of its new sec. 30B of the tax code, entitled "(f) Limitation on Number of New Qualified Hybrid and Advanced Lean-Burn Technology Vehicles Eligible for Credit." It's located at a page (or something) numbered [[Page 119 STAT. 1047]] (scroll down the doc and you'll see these markings.) I'd say it's about 3/4 of the way through the (massive) document. (I linked to this copy of it because it's not a pdf, thank God. I tried opening a pdf of this bill, and my computer basically just blinked and said, excuse me??)

Ah, current section 30B(f) (you quote them as citing section 30D(f), which I think is a typo). They cross-reference section 52, which defines members of a "controlled group" as a "single employer" for purposes of computing the "work opportunity credit" and generally require 50 percent common ownership; and section 414(m) and (o), which on a skimming is too hard to comprehend.

Based solely on section 52, it does not appear to me to be too difficult to structure around the 60,000 car limit (either through the use of a partnership or some other structure), though I could be wrong (or 414 is much more comprehensive). I would take as a prima facie case that I'm wrong the fact that there is a movement afoot to repeal the 60,000 vehicle limit, but that could be driven by environmentalists fooled into thinking that its inhibiting anyone from claiming the credit (not that they are easily foolable) as much as Toyota's lobbying.

Ugh: wouldn't that require some change in Toyota's management structure?

Also: 30D is (I think) a typo in S. 2025. One of the reasons it took so long to figure out.

Ugh: wouldn't that require some change in Toyota's management structure?

Ownership limits can be gotten around by forming a partnership that is not 50 percent owned by Toyota, and selling the cars through it. You could then allocate the income to the majority partner (or partners) but not actually distribute the cash (they agree to soak up the income without cash because they are not taxable in the US, but this might not work when it comes to selling cars). Later, after you're done selling, you buy out the foreign partner for some amount over his original investment (typically giving them the return of a lender) and then distribute the cash to Toyota. This might not work for many reasons (including that the partnership did not manufacture the cars) but it's at least plausible. Again, if there's a movement afoot to repeal the limit, that indicates to me that it is, at least in part, effective.

It wouldn't surprise me if there's a typo in the bill.

I am surprised that Americans expext so much from a profusion of little laws and regulations. If you just abandon all that and use a simple gas-tax then efficient cars, alternate fuels ant alternate transport will automatically become more attractive.
Please, let the people make their own choices and let the market do its job.

A "simple gas-tax" is not "letting the market do its job." It is simply a different method of influencing the market to achieve a desired result.

Gas taxes in the US aren't as high as many other places, but they are substantial, and yet we haven't seen any magical movement towards more efficient cars. So something must be missing.

Plus, this isn't proposing a new mechanism; it's removing an incredibly dumb and counterproductive feature from an existing one. That's why I didn't get into alternative ways of encouraging hybrids.



In the Netherlands we are paying nearly $7 per gallon.
You think it is a coincidence that the cars here can do more mpg's than in the US?
And of the twelve people in our office today six came by bicycle and two carpooled.
Believe me, it will work if the tax is high enough and long term.

"Gas taxes in the US aren't as high as many other places, but they are substantial,"

No, they're not, in the world context. Need one post the figures?

You're missing the point. Gas taxes in the US are high enough to have a measurable effect on personal behavior, and on manufacturing decisions. Whether gas taxes impose a substantial burden on my weekly paycheck is affected not one iota by the tax policies of other countries.

If you imposed a $5 tax on every slice of pizza, I'd consider that substantial, and it would affect my eating habits. If you told me that every other country has a $20 tax per slice, that wouldn't make me change my eating habits back.

I'd like to think there is a better way to solve the problem than by imposing a largely regressive tax that hits the lower and middle classes the hardest. Maybe one doesn't exist, but I'm suspicious of the ability of the gas tax to do it all, at least in America.

If you imposed a $5 tax on every slice of pizza, I'd consider that substantial

the current gas taxes are nowhere near as substantial as a $5/slice pizza tax.

I was not using the word "substantial" in a relative sense, no matter how much everyone tries to make it so. I was not saying our gas tax is as high as Europe's, I was not saying it's equivalent to a $5 pizza tax. I was simply saying that I think it's a substantial amount.

If you want to argue that gas taxes in America are too low to actually have an effect on anyone's behavior, be my guest. Everyone is too busy misinterpreting my statements to do that, apparently.

Steve, I guess the problem is that 'substantial' is a meaningless word in this context. A penny per gallon would be 'substantial' in the sense that the tax would, in fact, have substance. Obviously, you're not saying something that extreme. But it's a bit hard to know what you meant by it -- if you don't define what you consider the threshold of 'substantialness,' it seems reasonable to compare the taxes we pay on gas to what other people do.

The price of gas that's tax is approximately 15-20%. I'm not going to quibble over a few percentage points here and there, just compare this with (and I'm guessing, here, but it's fairly close to estimating) near 70% for the $7 a gallon case. Maybe a bit less if their refining costs are a lot higher, but close enough to see that one of these things is very unlike the other.

Ok, working with that fact, my view is that a 20% increase in the price of a commodity is enough to impact people's decisions on how much of that commodity they use and whether they seek out alternatives.

My opinion is that we see less of an effect from gas taxes at that level than we would normally expect from a 20% price increase, and thus I am reluctant to sanction a process where we gradually ratchet up the economic pain on the middle class until their pain forces the market to do something. If it's important to society that we build better, more fuel-efficient hybrids, there are surely more humane ways for policymakers to make it happen.

"Everyone is too busy misinterpreting my statements to do that, apparently."

Clearly everyone has gotten together to conspire against you.

Alternately, you might want to reconsider your wording, and why many people are independently disagreeing with it.

Or, perhaps, you can complaint about the mysterious conspiracy against you. Whatever works.

" matter how much everyone tries to make it so."

I mean, this is deeply weird. Do you really think we're all conspiring against you? Do you often think that?

I can't really respond candidly to those patronizing comments without violating the posting rules.

Let's instead address the merits. When I started out by saying "Gas taxes in the US aren't as high as many other places, but they are substantial," a reasonable person might have inferred that I wasn't trying to argue that gas taxes in the US are comparable to those in other countries, since I expressly acknowledged that that wasn't the case.

So when people show up to make the "point" that gas taxes in the US really aren't that high compared to other countries, it sounds a lot like willful obtuseness, since I flat-out made that point in my original statement. Nevertheless, I simply clarified my meaning.

And yet another commenter came along to ignore my point and instead claim "well, gas taxes still aren't as high in relative terms as the rhetorical example you gave." It's not "deeply weird" that I find the repeated failure of commentors to engage the merits frustrating. And I find it further frustrating that you still choose not to engage the merits, but instead to bring up a cheap meta-argument about whether I really feel there's a blogconspiracy against me. Kind of a waste of the Internet, if you ask me.

Either you believe a 20% tax on gas is enough to affect people's behavior in a meaningful way, or you don't - or you can take the third option and ignore the issue in favor of prattling on about my alleged paranoia. But in any event, the fact that gas taxes are significantly higher in Europe and elsewhere doesn't say a thing about whether we should expect a meaningful result at the 20% level.

I think Steve's point is clear now, and we can proceed to discuss it ;)

Hilzoy can bring a smile to my face with the simplest utterances. :)

To expand on my point a bit, it seems to me as an intuitive matter that there are things about the nature of America that make cars somewhat less negotiable than they may be in some other places. The prevalence of vast rural spaces. The sprawling nature of metropolitan areas that grew up in a car-dependent society and won't be altered overnight. The transitory nature of today's economy that makes it hard for people to pick up roots and move closer to work in order to save time and gas money, when they might find themselves at a new job in a different location 6 months from now.

I might be exaggerating the impact of these factors, of course; they're just my personal take. But that's my theory for why simply making the costs of driving more painful hasn't moved our auto market in the direction we want to push it (indeed, in recent years things seem to have moved in exactly the wrong direction), and why I'm hesitant to simply increase the level of pain in hopes of getting the result we want.

As I initially said on this thread, I certainly agree with hilzoy that this legislation was a particularly ham-handed way of working towards our policy goals - but I remain of the belief that the way to develop more fuel-efficient hybrids is to enact policies that aim directly at that goal, rather than simply increase fuel taxes and hope the market comes up with a heretofore-unseen response of the type we want.

I remain of the belief that the way to develop more fuel-efficient hybrids is to enact policies that aim directly at that goal, rather than simply increase fuel taxes and hope the market comes up with a heretofore-unseen response of the type we want.

Well, since we've moved this to a potentially more productive place, what policies would aim directly at the goal of developing more fuel-efficient hybrids, especially when Japanese companies have such a huge lead in development?

The Japanese have a huge lead, but their hybrids carry premium prices.

American automakers could try to offer similar technology at lower prices. Since American automakers are already on the ropes financially, the lower prices could be in the form of government-paid rebates. That would benefit consumers and the car makers.

Insurance companies could also offer policy credits for hybrids.

We could also revive the government's alternative fuel R&D program. (Imagine where we'd be now if we'd continued what Carter started 25+ years ago.)

Some research sectors, notably medical/biotech, operate under a new funding model, "Private-Public Partnership." PPP is a response to cuts in federal research grants and the rise of mega-philanthropic foundations, like the Gates Foundation. The way it works is, the mega-foundation funds basic and applied R&D, but retains the intellectual property rights. The research institution develops the technology, and (in the case of medical research) has the authority to offer it for low or no cost in underdeveloped countries. The mega-foundation can then take the technology and develop commercial applications from it, to make money. The commericialization can be a purely for-profit enterprise, or can be used to plow money back into funding more research.

I don't see any reason why a similar model couldn't be used to find, develop and commercialize alternate fuel vehicles... or, for that matter, more eco-friendly consumer products, manufacturing processes, etc.

CaseyL: Actually, a new Prius' MSRP is $21,725, according to a quick search. Not that bad. (A little under $4,000 more than a Corolla; around $7,000 more than a Yaris.) Factor in the credit you could have gotten until recently, and it's not bad at all.

Well, I'm not a neutral observer (the Japanese economy has recently gotten a little better and it makes a big difference to me in myriad ways), so when I wonder why US manufacturers aren't paying the price for their single minded pursuit of the SUV crowd, contrary to everything our Republican/libertarian overlords espouse ;^)

I also don't mean to pick on Steve (is this OCSteve, or a different Steve?), but the increased cost of gas seems to have definitely put a dent in the SUV market, so this stands contrary to what he is asserting. And the fact is that the Japanese automakers have a huge lead because they have made this a priority. This story isn't the one I'm thinking about, but it's the same family, and there was a much more indepth story about how much effort Honda is putting into this, which stands in contrast to the US automakers.

"I also don't mean to pick on Steve (is this OCSteve, or a different Steve?)"

I strongly assume a different Steve. People don't change posting names carelessly, as a rule. And style always outs, and this is clearly not the style of OCSteve. (To be sure, some of us are doubtlessly more apt to note style than others.)

Just think it is nicer to ask rather than assume. Wasn't accusing him of trying to slip in on another nick, at any rate.

"Just think it is nicer to ask rather than assume."

When in doubt, sure. As a close reader, I have no doubt in reading style.

But, to be sure, they used to pay me for that.

hilzoy: For people in a position to decide to buy a Prius rather than an Escalade or somesuch, sure, not too bad. For people who are driving the most highly polluting cars -- as opposed to merely fuel-inefficient -- it falls under the category of "nigh unaffordable." They'll have to wait for them to trickle into the used market.

Use of cars (and which cars to use) is steered by more than just the price of gas. Cost of car, maintenance, cost & availability of parking - if you live in New York price of gas is the least of your worries...

Also, as Steve mentioned, it depends on how much you NEED a car. Rural area or not, public transport available and reasonably priced, provisions for alternative means of transport. In the Netherlands public transport is good in most of the country - and being very flat makes biking less hard, helped by the perfect bike paths and bikers protections.
I remember being in a hotel in Washington and wanting to get a package of Oreo's in the supermarket across the road. It was less than 200 meters, but I *could not officially get there by foot*. Biking in that environment came close to suicidal activities.

Last but not least: While we have wonderfull promotional leaflets and infomercials telling is how much CO2 we save by buying cars that use less gas - this Guardian article shows where the real culprits are.

Mind you: I think it is important that useless fuel consumption is restricted, but only raising gas prices makes it into a status symbol, more than anything else I think. Attitude should change, away from "spending fuel is the American Way".

Hybrids have advantages other than just fuel economy. A hybrid designed for performance could easily offer superior acceleration, particularly at low speeds, due to the high torque available from electric motors. If I was setting out to promote hybrids one of the first things I'd do is try to make an arrangement with NASCAR to have demonstration races at their regular events, in which hybrids and other high fuel efficiency vehicles could compete. The rules would have to be structured in a way that emphasizes fuel efficiency without losing the excitement of the race. Racing would provide an incentive to improve the technology and would help to shift the image of hybrids as hippy and granny cars towards something more appealing to the testosterone set that buys most of the gas guzzlers.

Rules could be as simple as a fixed size gas tank and a minimum length pitstop time, with total distance set so that a vehicle getting 25 mpg would need 10 pitstops. With a fixed 30 seconds per stop that provides a considerable incentive to shave off a stop or two.

Hybrids have advantages other than just fuel economy. A hybrid designed for performance could easily offer superior acceleration, particularly at low speeds, due to the high torque available from electric motors.

I had thought this was the strategy behind the Honda Accord Hybrid, except that it turns out the improvements that they actually deliver are quite modest: 253 HP vs 244, 232 ft-lbs vs 211, 25/34 mileage vs 20/29. Essentially, they give you the mileage of the four-cylinder engine and marginally more power than the six-cylinder engine alone. I think it would have been a more useful experiment if they had designed a power train that augmented the four-cylinder engine instead. IIRC, the Accord Hybrid is not selling particularly well.

The strategy question is interesting. I don't think anyone, including Toyota, had an idea that hybrids were going to take off, and Toyota is apparently worried that the Prius is a one trick pony, which is why Honda is emphasizing performance.

Here is another interesting article that makes the point that having a hybrid option is becoming the price of entry into the market.

Honda's strategy seems to be to have the hybrid integrated into its product line, offering a hybrid option, rather than a separate hybrid. Honda is also working pretty hard on a clean diesel which could have more of an impact, especially in Europe where the infrastructure is much more developed.

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