Sunday, May 24, 2009

Repeal or Amend the US Gas Guzzler Tax

The US gas guzzler tax was created in the Energy Tax Act of 1978 and designed to discourage the purchase of inefficient vehicles. It had precisely the opposite effect.

The tax is paid by a vehicle buyer at the point of purchase. The tax is posted on the same window sticker as the EPA MPG rating at a new vehicle dealership. The gas guzzler tax only applies to cars. As SUVs and light trucks are not affected, the tax has created a major incentive since 1978 to purchase heavy vehicles. Light truck and SUV sales have gone from around 20% of total non-commercial vehicles sold in the US in 1978 to around 50% today (other factors have also played a part, but these have not been government related).

Gas guzzler taxes apply to cars that get less than 22.5MPG, with taxes beginning at $1,000 and increasing to $7,700 for cars which get 12.5MPG or less.

Want to immediately improve the incentive to become more efficient?  Amend the gas guzzler tax to eliminate the exemption for non-commercial light trucks and SUVs or repeal the law entirely and replace with a novel solution like a Vehicle Efficiency Market.

(Oil market environmental regulations are described in Oil 101)
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