When Top Gear’s Jeremy Clarkson reviewed the electric sports car Tesla Roadster, he had plenty to say. Notably, he complained about the price, which was at the time of filming in the UK, £92,000 (about $150,962.40 US). Lucky for all of you prospective Tesla Roadster buyers, the price has dropped to a mere $109,000. And if you moved to Colorado, you could get your hands on it for a mere fraction of the price.

Colorado? Yeah, you read that right. Colorado is offering a 38% tax credit on the Roadster through the end of the year. That brings the total cost of the Roadster to about $65,000.

It’s not just the Tesla that can take advantage of the credit. It applies to your run of the mill Prius, too. In fact, Colorado is ahead of the pack when it comes to providing tax breaks for hybrid and zero-emission vehicles. The state has been doing it for years.

But it’s the size of the Tesla refund that is attracting attention.

Bowing to pressure from overextended taxpayers, state lawmakers passed a bill which would cap such refunds at $6,000. The bill, however, doesn’t take effect until next year. That means that there’s still plenty of time to take advantage of the refund this year.

Though state lawmakers didn’t expect to see more than 10 Tesla refunds, one Tesla dealership has reported selling six cars this week alone. That’s about $252,000 in refunds in one week. That’s not a pace that taxpayers are happy to see when faced with a $320 million deficit in the state budget.

Of course, there are some restrictions on the refund. For one, to qualify, the vehicle must be titled and registered in Colorado. And the credit is only available in the year that the car was purchased.

However, since it’s a tax credit (and not a flat out dollars back refund), there is a chance that the amount of the credit could exceed a taxpayer’s net tax liability for the year. If that happens, any excess credit may be carried forward and claimed on future year returns for up to five years.

So, it may not turn out be the kind of hit that taxpayers fear. That still doesn’t make taxpayers feel better about what’s perceived as an irresponsible tax policy. The amount of the refund alone, it has been noted, is more than many taxpayers will pay for the total cost of their car. In a tight economy, this isn’t the kind of thing that sits well with many folks.

What do you think? Fair game or bad policy?

And if you’re interested, you can watch the controversial “Top Gear” review of the Tesla Roadster here:

(In case you missed the scandal, the BBC later admitted that the scene of the car being pushed into the garage was not a result of the alleged 55 mile fail.)

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Every summer, my husband and I have the same argument about whether we should get central air. We live in an old Victorian house in Philadelphia; it takes a while during the summer for the house to heat up but when it does, hoo boy, it gets hot. The thing is, it’s not easy to install central air in the house because of the layout – and there’s no existing duct work.

This year, it’s even more complicated because our old heater has probably sputtered its last burst of warm air. When we bought our house (more than ten years ago), the heater was about 45 years old. So, well, you do the math. We know that we need to replace the heater but my husband wants to replace it with a heater/air conditioning unit – which brings us back to our original problem regarding the air conditioning.

We’ve been pushing off the decision for years (and years). But Congress may have successfully forced our hand. Under the current tax laws, we have until December 2010 to make up our minds and install a new energy efficient unit in order to qualify for a tax credit. And it’s not a small tax credit. The tax credit is up to 30% of the cost of energy efficient water heaters, air conditioners, furnaces, windows and doors – up to a maximum of $1,500.

Let’s run those numbers. Our quotes have been between $5000 and $10000 for a new unit. Taking the average, let’s say that the new unit costs us $7500. The available credit on that unit would be the maximum, $1500, since 30% of $7500 is $2250 (over the cap). Credits are dollar for dollar reductions in your taxes due – as opposed to deductions which merely reduce your taxable income. So while it feels like we’re saving $1500, let’s think about it in a different way. Assuming we’re in a 25% bracket, that $1500 credit offsets the equivalent of $6000 in taxable income. We’re now talking mortgage interest deduction type numbers – see why credits are a great thing?

As long as we buy a qualifying unit, we get the tax credit and we save some money on our electric bill. Don’t even get me started on the energy savings. You can guess how much we’re spending on window units in the summer and heating costs in the winter. It’s not pretty.

It’s not just air conditioning units and furnaces that may qualify. Windows, doors and other appliances may be eligible for a federal tax credit. For a complete list of qualifying energy efficient appliances and home improvements, check out the Energy Star web site.

Some states offer energy tax credits which can be applied towards your state tax liability. Unfortunately for us, Pennsylvania isn’t one of those states with respect to appliances (to see a list of states which do offer incentives, click here).

I know what you’re thinking. We’re in a recession. Who has the money to front for a new system? Help is available. Pennsylvania, like many other states, offers low cost loans for taxpayers to help out with the cost of installation and purchase of new appliances (in Pennsylvania, check out Keystone HELP). You can click here to see if your state offers a grant, loan or rebate program.

And I’m not usually one to tip my hat to utility companies, but several offer programs that provide rebates, grants or loans towards the purchase of more energy efficient units. Check with your provider for more details.

So, with a little push from Congress, I think it’s settled that we’ll be moving forward on a new unit fairly soon. The only trick now is doing it without conceding to my husband that he’s right…

(Image courtesy of Wikimedia Commons and is in the public domain)Similar Posts:

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I previously blogged that Seattle was contemplating a tax on plastic bags which managed to garner a decent amount of support. Clearly, the initial support wasn’t enough.

Seattle voters firmly rejected the measure in a vote this month. The bill, had it passed, would have made Seattle the first city to tax both plastic and paper shopping bags. The measure would have required certain retailers to tack on an additional 20 cent tax per bag. The idea was that the tax would have served as an incentive to stop using disposable bags.

Supporters of the measure were disappointed but not swayed from their cause. They noted that their opponents spent nearly 15 times more than they did on advertising, lead by the American Chemistry Council, and yet the measure was defeated by only a factor of 3 to 2. For the supporters, it was a good first step.

Those in opposition to the measure were pleased to see it rejected, referring to it as “costly” and “unnecessary.”

So the matter is done… for now. There’s no doubt that it will be raised again. 2010 anyone?Similar Posts:

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When you think about sin taxes, you normally think about things that are bad for you such as cigarettes, booze and, if Congress gets its way, soda and sugary drinks.

Now, sin taxes are taking on a different slant: taxing things that are bad for the planet.

In Seattle, there is a bill pending to add a 20 cent tax on paper and plastic grocery bags. City voters will take up the bill on August 18.

In the meanwhile, both sides of the debate are putting serious time and resources into getting the word out. The American Chemistry Council, a lobby for the plastics industry, has reportedly spent more than $1 million on efforts to stop the bill.

Proponents, however, argue that the tax will both force residents to act responsibly and will raise revenue for environmental projects such as “waste prevention, recycling, city cleanup and environmental education programs.” Seattle expects to raise about $3 million per year from the tax.

A recent poll in Seattle shows a slight majority, 51%, of voters oppose the tax. However, another estimate shows that nearly 90% of Seattle residents regularly recycle or reuse plastic bags. While both sides sling mud at each other, it would appear to this east coast girl that maybe it’s not so much about opposing the usage of plastic bags but being taxed on the usage.

This is what I can’t stand about these debates. The rhetoric gets in the way of the message. The real question shouldn’t be “do you care about the environment?” but “is this the best solution to the problem?” Maybe raising revenue for environmental projects is a good thing; maybe it’s wasteful. I don’t live in Seattle, so I can’t speak to what makes good policy for the city. But I will say that I don’t believe that trying to pass a tax by labeling folks as “for” or “against” saving the environment is a constructive use of resources. It’s like saying that everyone that opposes the soda tax secretly wants to be fat.

We’ll know in a couple of weeks what the outcome is for Seattle. If the measure passes, it would tax bags at grocery stores, drug stores and convenience stores. This is similar to the Washington, DC tax approved earlier this year which imposes a 5 cent tax on carryout bags at grocery stores, drug stores, and retail food establishments. Hmm, that would make the tax applicable on cities on the east and west coasts. Maybe the midwest is next?

[Editor's note: No, you're not going nuts. I hit "publish" this morning before I meant to, which means that the first button didn't have the lovely plastic bag photo (courtesy of Wikimedia Commons and DanRos) and had a few typos. That's what happens when you're traveling and have to rely on hotel coffee.]Similar Posts:

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Cities are getting mighty creative in their efforts to fight rising deficits. No run of the mill income/wage/salary/vocation tax increases here. Philadelphia wants to raise its sales tax; Oakland is taxing marijuana and now DC is considering raising… its gas tax?

DC Council Member Tommy Wells (D) has suggested a gas tax hike of 3.5 cents. The tax on gas has not been raised in the District for nearly 20 years. Apparently, the justification for the tax hike is that gas is priced too low and this will bring it into line with the neighboring state of Maryland.

But, um, psst. Guys, over here: People buy gas in Maryland.

Not so much in DC.

Let’s face it. Nobody lives in DC. Okay, politicians do. But the latest guesstimates of population put the district’s total population at just over a half million. The total population for the “metro area” (read: suburbs of Maryland and Virginia) is over five million. My guess is that those folks aren’t flocking to DC for cheap gas.

Those in favor of the gas tax say that it’s time (maybe) and that additional revenue is needed (clearly). They also say that this is a great way to change “bad energy habits.” According to the Washington Post, “Paying more at the pump will make a new car buyer think twice about buying a gas guzzler; it may induce more drivers to switch to bus or transit.”

Um, nope. Not this tax hike anyway.

I’m all for increased use of transit. I take the bus every chance that I get and I am proud of the fact that, annually, we drive our Subaru Forester far less than the national average. But our behavior is not based on taxes or the cost of gasoline (quite frankly, it has a lot more to do with my limited patience with idiot drivers on the Schuylkill, but that’s another story altogether).

Taxes, like this one, meant to induce a certain kind of behavior are really only effective if they’re significant. A 3.5 cent hike in gas tax is not only statistically insignificant, it will clearly not induce masses of people to buy a different kind of car or to drive fewer miles. Assuming that the average driver logs 15,000 miles per year (that’s the federal average), a 3.5 cent gas tax hike would cost the driver of a 20 MPG car a whopping $26.25 for the year. People spend more than that at Starbucks in a week.

Other arguments for cleaner air and less congestion are (pardon the pun) pipe dreams. Look at those population numbers again. The District’s population sits at about a half million but about a million people find themselves in DC during the week. Those people don’t live in DC. And chances are, those people aren’t buying gas in DC.

So, let’s call a spade a spade: an increase in the gas tax in DC is easy revenue. Nothing more. Next.Similar Posts:

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Taxpayer asks:

Tell me this isn’t true. I got an email today that says that Congress is considering an extra tax on toilet paper. The email says that the Democrats have passed law to tax toilet paper to prevent global warming. I don’t believe in global warming and I think this is a stupid plan to tax us more. So tell me I’m wrong, taxgirl.

Taxgirl says:

While I haven’t received one of these emails, I can tell that something is making the rounds because I’ve received a number of similar questions. Some folks have even claimed that there’s a “per flush” tax. So, I figured that something had to have triggered all of this outrage…

And I found it.

But since you wanted me to tell you that you’re wrong, I will on a significant part of your question: the so-called “toilet paper tax” is not law.

What’s getting all of the fuss is the Water Protection and Reinvestment Act of 2009, also known as H.R. 3202. The bill was introduced by Rep. Earl Blumenauer (D-OR) just last week and despite the rumors making rounds, it is not a solidly Democratic bill. As of yesterday, there were twelve co-sponsors, four of which are Republicans.

The bill is in very early stages: it has not even gone through committee. As of July 17, it was referred to several committees, including the Subcommittee on Energy and Environment.

And now for the text of the bill. There’s a lot in the bill (it’s not a small bill) but I’m just going to focus on tax. The bill would impose a tax on the sale of containers of water-based beverages (4%); water disposal products (3%) and pharmaceuticals (.5%). The tax would be imposed on the manufacturer, producer, or importer and not the retailer or consumer. The tax is intended to be temporary and would end on December 31, 2015.

Of course, the devil’s in the details and that’s what is attracting the most attention…

Water-based beverages are defined as containers of water (duh) and those flavored waters or any beverage “created by mixing water with other liquids, flavorings, vitamins, or other ingredients where the resulting product is at least 50 percent water by weight.” There are a number of exceptions including medications, alcoholic beverages and concentrated beverages.

The most controversial bit is the definition of “water disposal products” which includes “soaps and detergents, toiletries, toilet tissue, water softeners, and cooking oils.” And there’s your toilet paper tax.

Revenues garnered from the tax would be used for a number of water-related programs including pollution clean up programs and safe drinking water funds. Those programs include replacing sewer systems and storm water systems and cleaning up “source water” sites which have been contaminated. The tax, together with an additional corporate tax provision, is expected to raise $10 billion and create 250,000 jobs (according to Blumenauer’s web site).

So yes, there’s a proposal to tax toilet paper. No, it’s not yet law. If you have concerns about the bill – or if you support the bill – let your Representative know (use this handy-dandy link to send a note to your Representative over the web). Now is the time to speak up. My personal take is that if you don’t complain to your Representative now, you don’t have the right to complain later.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl! – Now on Facebook!

Image courtesy of Wikimedia Creative Commons: Photo taken and released under GFDL by Tristanb.
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It’s Fix the Tax Code Friday! This week, I’ve been researching federal energy tax credits for an Earth Day post that I’m writing (yes, I’m aware that Earth Day is long gone – wait for the post, you’ll get it). I’ve been intrigued to see the reactions on both sides of the aisle about tax credits for energy efficient appliances and housing amenities.

Proponents of energy credits say that taxpayers need more incentives to go green. Opponents of energy credits claim that they’re being penalized for not “buying in” to the idea of global warming and other “green” issues.

What do you think? Should saving the planet be its own reward? Or should there be tax incentives to encourage the behavior?

Today’s Fix the Tax Code Friday question is:

Should the federal government allow energy tax credits or should environmentalism be tax neutral?Similar Posts:

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In what feels like deja vu all over again, the Senate and the House failed to worked together over the past two weeks to pass legislation.

Last week, the Senate voted 93-2 to extend the solar energy investment and wind energy production tax credits. The credits were set to expire at the end of this year.

With such an overwhelming “yes” vote, it was bound to pass in the House, right? Of course not. The House failed to vote on the tax credits, making it unlikely that an agreement on extensions would be reached before the elections.

And it’s not the first time. The bill has not passed in five previous attempts. Five.

Why hasn’t it passed yet? It depends on who you ask. As you can imagine, the Democrats blame the GOP for not supporting a plan that included funding from oil and gas companies to pay for the credits. The GOP blames the Democrats for taking an “all or nothing” approach, only agreeing to the extensions if they are fully paid for.

So we got nothing. It’s like the bailout plan all over again…Similar Posts:

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French Prime Minister Francois Fillon has announced that the country will not tax sporks and other plastic utensils after all.

The French government has conceded that now is perhaps not the best time to introduce the products now because many French are already worried about their declining purchasing power. Indeed, those opposed to the tax criticized Fillon for creating a tax that would hit ordinary citizens in the pocketbook.

This week, Fillon backed off of the tax, telling reporters:

There will be no new tax. There is no picnic tax.

However, the turnabout on the tax was not well received by Environment Minister Jean-Louis Borloo. Borloo has made it a priority to make France a more environmentally-friendly economy.

After the announcement, the French newspaper Le Figaro reported that the government is considering a second list of disposable products that might be subject to green taxes in the future. However, the government denies the existence of such a list. N’est-ce pas intéressant?Similar Posts:

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You only have to a take a peek at the Olympic coverage on NBC to confirm what tourists already know: China has a smog problem.

On the opening day of the Olympic games in Beijing, video and photos showed shots such as the one above, of the National Stadium, shrouded in smog. And of course, the US cycling team caused quite a stir when they arrived in Beijing wearing respiratory masks, ostensibly to protect them from the poor air quality.

How smoggy is China? No one knows for sure. The Chinese government has released figures as low as 88 Air Pollution Index (API), which they feel is extremely safe, though the World Health Organization does not like to see API levels above 50. A team of scientists from the UK had been monitoring the air quality in Beijing but were asked to cease their activities; an email noting the stoppage said, “I am very sorry to have to let you know that at the request of our Chinese partners in this project we are unable to provide public access to the Beijing Air Quality forecasts during the Olympic Games period.”

Despite the lack of detailed information, one thing is certain: China’s air quality needs improvement. And the Chinese government is clearly aware of this problem. The issue is not whether to reduce pollution but how.

The Chinese may be taking a page from their European counterpart’s playbook on their efforts to control pollution: discourage ownership of vehicles that pollute by raising taxes.

The Chines government is raising the sales tax on cars with engines larger than four liters to a whopping 40%. For cars with engine capacities from three to four liters, the tax will be raised to 25%. And small cars? The sales tax rates on those cars will be lowered to 1%. The new rates are effective September 1.

The Ministry of Finance and the State Administration of Taxation made the announcement on yesterday. The Ministry said that the purpose of the increase was to “help restrain the production and sales of high-emission vehicles while promoting the production and sales of low-emission cars.” Some analysts place the blame for poor air pollution in Chinese urban areas like Beijing on car emissions – claiming that as much as 80% of the pollution in those areas are linked to cars.

I would love to see the comparisons of air pollution change in urban areas in the US, the UK and China after these taxes are in place for a significant period of time. While countries like the UK and China are taking punitive measures to discourage pollution, the US is taking the opposite tact by incentivizing conservation. Opposing strategies to hopefully achieve the same end: which do you think will work best?Similar Posts:

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