The Hype of Hybrid Tax Breaks in Wisconsin

In recent years, gas prices have reached levels that have never before been experienced, even when you factor in inflation. The increase in gas prices hurts more than just those consumers that are forced to cut back to afford the extra money spent on gas. Local and state economies are just as hurt because consumers have to funnel their spending on consumer goods towards gas. The state of Wisconsin recognized the effects on its economy leading officials to take action.

While the increase in gas prices hurts most drivers, it does not hurt all. The only exception is those that drive vehicles that get good gas mileage. Drivers that own hybrid vehicles are not affected by gas prices in the same way that drivers of gas-fueled cars are.

Even though hybrid owners may save money in gas, they certainly do not save on the price tag of the vehicle. Many people that desire to own a hybrid are not able to purchase one because of the price of the car. Take the Honda Civic, for example. The standard Civic sedan has a manufacturer’s suggested retail price of $15,010. The hybrid Civic sedan, on the other hand, is a little over $7,000 more at $22,150. Would drivers really save $7,000 in gas over the life of the vehicle? Anything is possible.

Wisconsin lawmakers realize that something must be done to improve their economy. They were seeing much damage caused as a result of increased gas prices. Officials realized that if more people purchased hybrid vehicles state’s consumers would save on gas. Since the average hybrid gets 10 to 15 more miles per gallon than the average gas-fueled vehicle, it makes sense that more hybrid drivers means more money for people to spend in the economy.

There was just one problem with this idea. With the average hybrid costing almost 50% more than its gas-fueled counterpart, officials realized that it would be difficult to encourage people to spend the extra cash on a new vehicle. After all, no one really knows if they would spend $7,000 in gas over a period of 60 months.

To encourage drivers to purchase hybrid vehicles, the government introduced a law, “The Hybrid Car Credit”, that allowed a sales tax exemption for drivers that purchased a hybrid vehicle. As with many other incentives, there is a catch. First, the sales tax exemption is only good up to $1,000. Anything over this amount cannot be included in the exemption. Second, the hybrid vehicle purchased must get a minimum of 40 miles per gallon. This is the combined city/highway gas mileage required for the vehicle to get the tax exemption.

Recently, the Wisconsin Department of Revenue made an announcement that might negate the benefits received from the tax exemption. If employers offer cash incentives for employee purchase of hybrid vehicles this income must be reported as taxable income. They deem this compensation as taxable income and require employers to report the incentives as such. The incentive must be included in the total income amount on the employee’s yearly W-2 statement. In addition, income tax may be withheld from rebates or cash incentives received for the purchase of a hybrid vehicle.

Although the Hybrid Car Credit succeeded in getting people excited about the purchase of a hybrid vehicle, in the end the legislation did not pass. No doubt there were several disappointed Wisconsin citizens that purchased hybrid cars in expectation of a tax exemption that never came to fruition. Perhaps it is better that the law did not pass. Even if drivers were able to receive a tax exemption from their hybrid purchases, any rebates or incentives received from their employers would cancel out the exemption.

How unfortunate would have been to find out on one hand that you receive an exemption from purchasing a hybrid while on the other hand incentives received would be taxable by the state and federal government. Even if the government does not offer tax breaks or other benefits from the purchase of a hybrid vehicle, there are benefits of the vehicle itself. The decreased amount that is spent on gas is incentive enough for many people, even if it means spending extra money on the vehicle.