Amazing how so many people are under the impression that hybrids are plugged in, when they never are. Of course, a Prius has an amazing amount of room now as well (it is considered mid-size).
While the economy is becoming more efficient (less energy per $ GDP), oil usage is ridiculous in this country. Its not safe or healthy. But I don't approve of raising taxes on gas to ridiculous levels to encourage conservation, or of providing tax incentives which worsen the deficit for fuel efficient vehicles that are very limited in supply.
So what to do? My proposal would be to roll in, over a period of 8 years, a $2 federal surcharge per gallon of gas (hold on, before you panic). That gives people time to adjust the type of vehicles they own. That money would then go to a federal fund to be redistributed to income tax payers on their 1040 returns. For every person of voting age in a household on a tax return, you can claim a proportional credit on your return. Hypothetically, if the average driver goes 12,000 miles per year in a 25 mpg car, that would be $960 in surcharges. If you have 250 million drivers, that's $120 billion nationwide in surcharges, and every driver would be eligible to claim a $960 tax CREDIT on their return.
So how would that help? If you have a car that gets 30 mpg, you've only paid in $800 in surcharges, but you still get the $960 credit, so you get a reward for conserving. If you get 12.5 mpg in your H2, that's $1920 in surcharges, so you're paying a $960 premium on your gas and getting penalized for waste. So yes, it would be like a tax on those who waste fuel. But it would be one that everyone, regardless of income, could choose to avoid just by doing better than average. Buy a hybrid compact car getting 43 mpg and drive 10,000 miles per year, and you would end up $500 ahead every year, and the it would cost the government nothing, unlike current hybrid credits. Take public transit and save even more!
It seems that something like this would be a cost effective way of convincing people to shift habits, conserve oil, send less money to support corrupt middle east regimes, discourage urban sprawl (which would in turn save tons of money on road construction and maintenance), and improve air quality at the same time (fewer emissions).