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Gotcha. And don't sell yourself short, you have me bashing my head against the wall sometimes trying to think of a suitable rebuttal to some of your comments. Not to mention you're one of the few to realize I'm not quite as liberal as many think.
Given that, my understanding with tax incentives (and this area is definitely not a strong source for me) is that the government isn't "paying out" so they don't have to find a source for the money. It's a matter of not as much in taxes being paid into the system, just as if a cheaper car was purchased. It helps the consumer offset the additional cost and government collects almost the same in taxes as if they purchased the cheaper car.
The government has been known to provide these incentives as a way of helping bring new technology to light and help the consumer
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