Saturday, July 3, 2010

Gas Guzzler Tax Muscled Up

The Gas Guzzler Tax arose out of the Energy Efficiency Act of 1978. It is a reasonable means to "encourage" energy efficiency by using a penalty for the purchase of gas hog passenger vehicles. SUVs, minivans and pick ups are exempted. The federal government has attempted to deal with SUVs, minvans and pickups by the use of the Corporate Average Fuel Economy Standards. CAFE allows the government to penalize the manufacturers by producing vehicles, which as a whole average less than 24 or so miles per gallon. If Ford can sell a lot of Fiestas, it can then sell a lot of F 250's at no penalty.

The goal of reduced oil consumption must rule the day. MUST RULE THE DAY! Once the USA decided to put a man on the moon, it did. Likewise, if and when our leaders decide to change the energy dynamics of the country, it will be done. If and when, well there's two words of precision.

This is the structure of the gas guzzler tax for passenger vehicles. The combined fuel economy is determined by the Environmental Protection Agency using a formulaic hodgepodge of calculus. It is a good example of "Keep it Complicated, Genius".

Combined fuel economy of: Amount

at least 22.5 mpg No tax

at least 21.5, but less than 22.5 mpg $1000

at least 20.5, but less than 21.5 mpg $1300

at least 19.5, but less than 20.5 mpg $1700

at least 18.5, but less than 19.5 mpg $2100

at least 17.5, but less than 18.5 mpg $2600

at least 16.5, but less than 17.5 mpg $3000

at least 15.5, but less than 16.5 mpg $3700

at least 14.5, but less than 15.5 mpg $4500

at least 13.5, but less than 14.5 mpg $5400

at least 12.5, but less than 13.5 mpg $6400

less than 12.5 mpg $7700

Considering that the average new vehicle costs $30,000, these penalties are relatively slight. For the most part, they are too insignificant to discourage buyer's behavior. In order to encourage better energy efficiency and to reduce oil dependence, I propose:

1. Change the gas guzzler tax to 25% of the vehicle's manufacturer's LIST price, using the CAFE standard of 24 mpg. Buyer pays 25% tax on any new vehicle rated below 24 mpg,

2. Include all vehicles, passenger cars, SUV's, minivans, pick ups and vans, only exemptions COMMERCIALLY registered vehicles,

3. Continue to raise the taxable percentage from 25% by 2% per annum starting on January 1st of each year until the percentage is 35% and then reevaluate the impact of continuing incremental adjustments. Also raise the mpg standard by 1 mpg per annum to 29 mpg and reevaluate as with the percentage adjustment, and

4. Include used vehicle sales. Base the taxable amount on the resale price and apply same mpg standard.

It must be recognized that used vehicles consume as much fuel as new cars. If a buyer wants to choose inefficiency at a used purchase, the same disincentives must apply. Guzzling used vehicles should be worth less and be more likely to be scrapped.

Within five to seven years, the make up of the American vehicle pool should change dramatically. In addition, manufacturer's, clever as they are, will meet the consumer demand for cool or large or fast or whatever vehicles, which are fuel efficient. Free market economics will always apply. Other alternatives such as electric and natural gas vehicles should become more appealing. Fuel savings and energy independence will be positively impacted. It's time...

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