No, it's probably not right to say that the "Cash for Clunker's" program is funded by income tax dollars. It's funded by your government, and your government gets it's money from a whole whack of different sources, probably one of the biggest hunks of which is your income tax dollars. Still, there's income taxes from business, royalties from others extracting raw materials from federal lands, including oil, minerals, and lumber, profits from businesses owned by your federal government like the US Postal Service, capital gains taxes on the sale of stocks and real estate, import duties on goods brought in to the US, excise taxes on goods produced and sold in the US like alcohol, tobacco and gasoline, every kind of fee and appropriation imaginable from the day passes to your national parks to money confiscated from criminals and drug dealers. Basically, the money comes out of "general revenue", a big hunk of which, I suspect, is your income taxes.
What I WOULD like to see is the "Cash for Clunkers" program paid for by NOT giving out billions in foreign aide money to every country around the world like the US does every year. In a lot of those cases, it's the top brass in the country that pocket that foreign aide and buy personal jets or villas on the French Riviera or the loyalty of their country's army with it. Or, like in the case of North Korea, you guys are paying billions to provide them with energy so they don't develop their nuclear power industry... which is all the more incentive for them to start up their nuclear reactors again as soon as the flow of money into their country stops. An impartial observer would call it blackmail. If North Korea starts stockpiling nuclear weapons, it'll be South Korea, China and Japan that will have the most to fear, not the US.
I expect economists are watching this "Cash for Clunkers" program very closely to see how much of a stimulus it creates, given it's cost. If it does well, then I expect this kind of grass roots economic stimulus is going to be much more common in future. It makes much more sense to hand out 2, 4 or 8 billion dollars to Americans to encourage them to buy products made by other Americans than to throw hundreds of billions of dollars at each of the major banks and just tell them to "lend it out" to get the money flowing again. The banks just put the money in their safes, and then gave it back again so they could keep giving obscenely wealthy bonuses to their top managers.