Environmental Economists have long argued that in a simple world, a tax on 'bad' actions or a subsidy on 'good' actions can result in the same net outcome. That is, both are economically efficient. It's just a matter of who gains and who loses from the tax or subsidy. Well, it looks like Massachusetts (some in the legislature, that is) has decided that a subsidy for hybrid drivers may be the way to go.
From CNN.com:
As fuel prices soar and drivers search for ways to save money, lawmakers are pushing a bill they say would make Massachusetts a national leader in the drive to ease dependence on gasoline.
The bill, which could come up for a vote in the Senate as soon as Thursday, would reward drivers who buy hybrid or alternative fuel cars with tax breaks, free transponders to get through tolls quicker and open access to HOV lanes.
The bill also would require that at least half of the state's fleet of vehicles run on alternative fuels by 2010, and establish an Alternative Fuels Institute at the University of Massachusetts.
[of course, no good bill is complete without the requisite pork]
Drivers who purchase a hybrid or alternative fuel car would also receive bonuses, from a $2,000 income tax exemption to a free Fast Lane transponder for the Massachusetts Turnpike.
Environmental and consumer groups are applauding the move.
"This bill will lead to enormous improvements in our air quality," said Brooke McConnell, of the Massachusetts Public Interest Research Group. "Massachusetts will get cleaner cars on our roads sooner and save consumers money."
By the way, the bill is supported by the state's Republican governor (oops, that's close to being too political). My point? Here's a case where a state legislature, environmental and consumer groups and both political parties agree...economic incentives may be the way to go. Now we just have to wait and see if it passes.
