Fore! Cash For Clunkers Hits The Links

Posted on Fri 10/30/2009 by

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nick_loris_smBy Nick Loris

Wonder what ‘Par’ is for this hole?

This is not a new story from the Wall Street Journal, but certainly one worth noting:

“We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama’s stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart.

The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. Even in states that don’t have their own tax rebate plans, the federal credit is generous enough to pay for half or even two-thirds of the average sticker price of a cart, which is typically in the range of $8,000 to $10,000. “The purchase of some models could be absolutely free,” Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. “Is that about the coolest thing you’ve ever heard?”

The golf-cart boom has followed an IRS ruling that golf carts qualify for the electric-car credit as long as they are also road worthy. These qualifying golf carts are essentially the same as normal golf carts save for adding some safety features, such as side and rearview mirrors and three-point seat belts. They typically can go 15 to 25 miles per hour.”

What were those Lease Back figures again?(To hide the Thumbnails, click on the white arrow on the right.)

There’s more:

In South Carolina, sales of these carts have been soaring as dealerships alert customers to Uncle Sam’s giveaway. “The Golf Cart Man” in the Villages of Lady Lake, Florida is running a banner online ad that declares: “GET A FREE GOLF CART. Or make $2,000 doing absolutely nothing!”

Golf Cart Man is referring to his offer in which you can buy the cart for $8,000, get a $5,300 tax credit off your 2009 income tax, lease it back for $100 a month for 27 months, at which point Golf Cart Man will buy back the cart for $2,000. “This means you own a free Golf Cart or made $2,000 cash doing absolutely nothing!!!” You can’t blame a guy for exploiting loopholes that Congress offers.”

The story speaks for itself for the most part but there are a few points to take away here. 1.) If you subsidize something enough, people will buy it. But that money has to come from somewhere – either from borrowing it or raising taxes. Edmunds.com reports that it cost $24,000 in taxpayer money for each car sold and is now in a back-and-forth with the White House. Edmunds claims cash for clunkers affected the timing of sales more than the volume of sales. 2.) We’re talking about breakdowns in a small scale government program here. Think of the loopholes in a much more complex, convoluted case, like a cap and trade program.

Contributing Author Nick Loris writes at The Heritage Foundation and he is a Research Assistant at The Heritage Foundation’s Roe Institute for Economic Policy Studies.

Read more informative articles at Heritage – The Foundry

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