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Do Luxury Hybrid Buyers Really Deserve Green Tax Credit?

Wednesday, 22 Dec 2010 | 12:37 PM ET

In the federal government's quest to wean drivers off oil, should those handing out incentives discriminate against some car buyers? Do people who can afford a Porsche need taxpayer help to go green?

Source: Kevin Song

For the moment, price tag and paycheck don't matter when it comes to providing tax credits to buyers of hybrid cars. Several luxury brands qualify for credits worth thousands of dollars, but only if drivers buy before the end of the year.

For example, there's the 2011 Porsche Cayenne S Hybrid. This is Porsche's first hybrid, for around $67,000, and it's been hard to find in some places.

Porsche USA tells CNBC 138 have been sold since launching about six weeks ago. Buy one by December 31 and you will qualify for a federal tax credit of $1,800. "The fuel consumption is phenomenal," says Steve Kienle of Walter's Porsche in Riverside, Calif.

"It receives 21 miles per gallon in the city and 25 miles per gallon on the highway, and it goes from zero to 60 in 6.1 seconds." He admits that at 21 mpg, "It's not your typical hybrid, but then again it's a Porsche."

Kienle says the tax credit is one reason people are taking a look at the Cayenne Hybrid, but it's not the only reason. However, it could make a difference in spurring sales over the next week. "I don't think anybody expects to get a tax credit on any luxury brand, but $1,800 savings is still $1,800 savings."

One person considering a purchase ASAP is Bob Scheussler, who already owns a Cayenne he bought at Walter's Porsche. However, he likes the idea of better gas mileage with the hybrid, since he often tows race cars. "It's a tax credit, not a tax deduction, so it's fully $1,800 off the bottom line of the taxes, and it's pretty nice."

The Porsche Cayenne S Hybrid isn't the only luxury car qualifying for a tax credit. A government website lists all the makes and models that qualify.

High-End Hybrid Tax Credits
Rich people are getting big tax credits for buying very expensive, high-end hybrids, with CNBC's Jane Wells.

The 2011 BMW ActiveHybrid X6 qualifies for a credit of $1,550. Both the 2011 Cadillac Escalade Hybrid and Mercedes ML 450 Hybrid qualify for credits of $2,200.

The Nissan Altima Hybrid credit is $2,350. And the six-figure Tesla Roadster qualifies for a tax credit of $7,500 (and the credit on the Tesla is still good next year).

Is it worth it? Kevin Song of Massachusetts ordered his Cayenne Hybrid in November and just recently took delivery—that's his SUV you see in the picture above. He loves it.

As for whether he should get rewarded by taxpayers, Song says, "I think any incentive that reduces our demand for foreign oil is a good one. Why not give the incentive to someone who is on the fence about buying a gas-powered Cayenne S or the Hybrid version?"

Song says he wasn't aware of the tax credit when he bought the hybrid, but he is certainly taking advantage of it. "Who turns down free money?"

Watch for upcoming reports from Jane Wells and other CNBC correspondents on-air and online in our "The Fleecing of America" series, focusing on the federal budget, government spending, and the use of your tax dollars.

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