Detroit
AMIDST THE CUTTING-EDGE Ferraris, Jaguars, and Lexus concept vehicles at the 2005 North American International Auto Show in Detroit last week was one particularly pricey concept that is a government creation: a federal tax gift to upper-class Americans buying fuel-efficient hybrid cars.

While Washington played host to the presidential inauguration, 6,000 international journalists and nearly a million spectators descended on America's Motor City for a different kind of inauguration: the annual rollout of the auto industry's newest products. One of the market's hottest niches is for green vehicles like the Toyota Prius and the Honda Accord Hybrid--gasoline/electric hybrids marketed to liberal, socially-conscious buyers with six-figure incomes. In 2004, hybrid sales reached 80,000 units in the United States, mostly to "luxury-type vehicle owners, people who want to be first on their block with plasma screen TVs and all that," says Ford spokesman Dan Bedore.

Limousine liberals? Call them "hybrid liberals."

But unlike other, low-volume niches such as plasma TVs or high-performance sports cars, hybrid buyers will not be paying a premium for their products. In fact, they will be receiving a federal subsidy of $2,000 per car.

Billed by its congressional supporters as a way to seed new technology in the fight against global warming and oil dependence, the hybrid tax break has lined the pockets of some of the richest people in America.

For example, the Toyota Prius--America's best-selling hybrid at 30,000 units sold last year--is typically bought by childless couples with an annual household income of $100,000, according to Toyota's own demographic study. The

With the Lexus SUV and other new hybrid offerings from Mercedes, Honda, and Ford, hybrid sales are expected to more than double this year to 165,000 units in the United States. That means a total federal subsidy of some $330 million to upper-income customers.

Sage Eastman, press spokesman for the tax break's congressional sponsor, Rep. Dave Camp from Midland, Michigan, defends the tax break: "Congress wants to encourage emerging technology that can have a lasting effect on the environment. Initially, the tax break may have been taken advantage of by wealthier individuals, but in the long run we'll see a broader use as more cars are introduced into the market."

Keith Ashdown, vice president for policy for the non-partisan Taxpayers for Common Sense, however, is skeptical the hybrid tax credit is serving its purpose. "You want tax breaks that alter consumer behavior. This tax break probably isn't working because it's putting money into the pockets of people who would buy this product in the first place."

Even with the subsidy, however, auto companies are losing their shirts on hybrids.

Since gasoline/electric hybrids use two power sources--a combination of a gasoline engine and an electric motor--they are substantially more expensive than standard cars. Though hybrids typically sell at a sticker price of $3,500 over comparable gasoline cars, manufacturers are not recouping their costs.