Tax-Guzzlers

[June 25th, 2008]

While less enlightened Americans cling to their one-ton pickups adorned with Jesus-fish emblems, Portlanders treasure their slick, quiet, high-mpg hybrid cars. The Portland metro area now has more hybrids per capita—about 1 for every 340 households—than any other city in the country, according to market researchers.

Which prompts the question: If demand is already high and climbing as fast as the price of gasoline, why does the state keep giving away money to people buying hybrids?

Like many states, Oregon has long offered generous tax credits—on top of existing federal tax credits—to buyers of new hybrids.

Businesses claim up to 35 percent of a hybrid’s cost as a state tax credit. Individuals can claim state income tax deductions of up to $1,500 for one of 14 hybrid models, including the GMC Yukon hybrid SUV (standard retail price: $51,000, 21 mpg in the city) and the Lexus LS 600h ($105,000, and 20 mpg in the city).

Since these tax credits’ inception in 1999, they have cost the state over $13 million, or nearly enough to buy every graduating senior in Portland Public Schools a year’s tuition at Oregon State University. Last year alone, the state doled out $5 million in hybrid tax credits.

The idea was to make fuel-efficient cars a more attractive buy, thus cutting pollution and saving the world. But today’s record gas prices—pushing $4.50 a gallon—are a better sales pitch for hybrids than any tax incentive.

“The tax credit has outlived its purpose,” says Chuck Sheketoff, director of the Oregon Center for Public Policy. “It outlived it from the get-go.”

When WW asked several Portland-area Democratic lawmakers if they would be open to revisiting the hybrid credits in the 2009 Legislature, they all said yes.

“Our tax incentives ought to be based not on whether a car is a hybrid, but whether a car is fuel-efficient,” says state Rep. Ben Cannon, a Democrat from Southeast Portland.

If you want to buy a hybrid—with or without the incentive—take a number.

At Broadway Toyota in Northeast Portland, there are 300 people on a waiting list for Priuses, says sales manager Chris Hall. Another 50 are waiting for Camry hybrids. Problem is, Toyota can’t make enough of the special batteries that power its cars. “We have more buyers than we have [hybrid] cars,” says Kent VanArnam, marketing director for Dick Hannah Dealerships, which sells Toyota and Honda hybrids.

Auto dealers say demand is up not just for hybrids, but for all fuel-efficient cars. And there’s evidence the hybrid tax credit was never a selling point for many.

A statewide survey by the Oregon Environmental Council in 2003 found one in four hybrid buyers neglected to claim the credits. Only two in five said they were a factor in their decision to buy.

About 2,450 Portlanders have claimed the credits, according to the state Energy Department. That’s clearly just a slice of local hybrid owners, considering that people in the metro area bought 1,380 hybrids in May alone, according to research by hybridcars.com and R.L. Polk & Co.

There’s another issue, just as troubling as an outdated tax credit siphoning money that could be better used elsewhere: fairness.

People who take mass transit burn less fuel—and therefore contribute less to global warming and other evils—than people who drive hybrids. According to the eco-wonks at Seattle’s Sightline Institute, a mostly full transit bus is three times more efficient than a Prius with a lone driver.

Of course, the No. 6 line doesn’t have a moonroof.

By mapping out the addresses of tax credit recipients, it’s clear that hybrid owners live all over the city—except east of 82nd Avenue and in swaths of North and Northeast Portland. The latter areas have some of TriMet’s most packed bus routes. They’re also some of Portland’s least wealthy, least white neighborhoods.

So, yuppies who can afford a $22,000 new Prius get a tax giveaway. Meanwhile, the poor get squeezed—even though their daily commute is cleaner. Squeezed how? Well, TriMet is set to charge monthly passholders an extra $120 a year, to cover higher diesel prices. That ain’t cheap, especially if you make Oregon’s minimum wage of $7.95 an hour.

As Sheketoff points out, the $5 million in hybrid credits last year could’ve gone to health care or schools—or stayed in the pockets of riders who will cover TriMet’s $4.5 million budget deficit.

“It’s an issue of budget priorities,” Sheketoff says.

^Web Extra: Hybrid Owners in Portland