Results
The results of the cost and benefit comparisons were fairly straightforward. Regardless of the cost of fuel and the number of miles driven, the buyer of a hybrid consistently posts a net loss. Even assuming fuel costs of four-and-a-half dollars per gallon (the most expensive fuel scenario modeled) and an annual mileage of twenty-thousand miles (the highest mileage scenario modeled), the buyer is still at a net loss of nearly eighteen-hundred dollars. Combining the state benefit in increased sales tax and the public benefit from environmental benefits creates a surplus of less than two hundred dollars, and the federal losses from taxes on fuel are over three hundred dollars in and of themselves.
This is the scenario that creates the greatest benefit to the buyer in terms of fuel savings (the more expensive fuel is and the more the buyer uses, the more the savings when compared to a conventional car), and these rest of the stakeholder's interests actually remain fixed as currently modeled. There might also be an expected increase in the loss of tax revenue from fuels sales in this scenario, as the less fuel bought...
In the other scenarios modeled, where the mileage was lower and/or the cost of fuel was lower, the cost to the buyer became increasingly high relative to the benefits, without the other factors changing. This mde it quite clear that buying a hybrid would not be viewed as worthwhile by the majority o consumers unless there was a tax incentive in place.
Policy Recommendations
Where this tax incentive should come from, however, is a different question. It is recommended that individual states institute a tax credit, as they actually post a gain in a non-tax-credit scenario due to the increased revenue from sales tax. Any federal credit given should be extremely minimal, and it is not advised that the federal government necessarily add any tax incentives to hybrid purchases. Giving money to states to support programs and incentives would be wiser use of federal dollars and more in keeping with tenets of federalism.
