Gas Guzzler Tax

What Is the Gas Guzzler Tax?

The gas guzzler tax is a surcharge added to the sales or lease price of cars in the U.S. that have poor fuel economy ratings. The tax, which is paid by the manufacturer or importer of the vehicle, shifts relying upon the miles-per-gallon productivity of the vehicle and reaches from $1,000 to $7,700.

The gas guzzler tax is forced on passenger cars however not on trucks, sports utility vehicles, or minivans. This is on the grounds that the law was passed in 1978 when such models were rarely utilized as passenger vehicles.

Congress laid out the gas guzzler tax provision in the Energy Tax Act of 1978 to put the production and purchase of fuel-wasteful vehicles down.

How Does the Gas Guzzler Tax Work?

To escape the gas guzzler tax, a vehicle must get something like 22.5 miles per gallon (mpg) in combined city and thruway driving.

The amount of the tax due depends on just how much gas the vehicle swallows. That is, the more awful the fuel economy, the higher the tax. Cars that fall just below 22.5 mpg are taxed $1,000, while cars that get under 12.5 mpg are taxed at $7,000, the highest point of the reach. The tax is reported on Internal Revenue Service (IRS) Form 6197. It is reported after the finish of the production year when the total number of vehicles created is known.

Customers for another vehicle will see the amount of the tax posted on the window sticker of the vehicle assuming that it is subject to the gas guzzler tax.

Which Cars Are Subject to Gas Guzzler Tax?

The EPA distributed a rundown of new vehicle models that were subject to the gas guzzler tax up until 2016. It has not distributed one since, however the 2016 rundown of gas guzzlers gives a feeling of the sort of cars that are subject to the tax.

The majority are very good quality luxury and sports cars, including models from Aston Martin, BMW, Ferrari, and Rolls-Royce. A couple of American muscle cars were on the rundown, too, including the Chevrolet Corvette and one cycle of the Ford Mustang.

How Fuel Efficiency Is Tested

Anyone with any interest at all in the fuel economy of any vehicle sold in the U.S. can check the Fuel Economy Guide that has been distributed by the U.S. government for each model year starting around 1984.

Manufacturers are required to involve a similar test as the EPA when they measure vehicle fuel economy for the gas guzzler tax and new vehicle fuel economy labels. Nonetheless, the calculation procedures are unique. As per the EPA, an adjustment factor is applied to the fuel economy test results for the purposes of the label, however not for the tax.

The adjustment is intended to mirror the differences between genuine driving and research center testing conditions. This difference is alluded to as being used shortfall. To work out the shortfall, mpg values listed in the Fuel Economy Guide and displayed on fuel economy labels depend on three tests notwithstanding the standard fuel-economy test.

The combined city and expressway fuel economy that is utilized to decide tax liability isn't adjusted to account for being used shortfall, so it is higher than the mpg values gave in the Fuel Economy Guide and posted on the window stickers of new vehicles.

Issues With the Gas Guzzler Tax

At the point when the gas guzzler tax was forced in 1978, prices at the pump had increased 75% from six years sooner. In the mean time, U.S. oil production crested in 1970 and was falling consistently during that time as demand increased.

The OPEC oil embargo of 1973 added extra pain for consumers in the U.S. furthermore, abroad. The decade is popular for its gas deficiencies and soaring prices.

This is the environment where the gas guzzler tax was passed. Its purpose was to boost more fuel-cognizant spending with respect to consumers and fuel effectiveness with respect to manufacturers.

Vehicles that are Exempt from the Gas-Guzzler Tax

In 1984, Jeep presented the Cherokee XJ, which is widely credited as the first game utility vehicle (SUV). The SUV didn't exist when the gas guzzler tax was passed, yet over the course of the next 30 years, it turned into the most famous type of vehicle sold in the U.S.

In 2019, American consumers kept on leaning toward trucks and SUVs over cars. Nonseasonally adjusted passenger vehicle sales in the U.S. for 2019 declined 10.9% to 4.7 million units, versus 5.3 million units in 2018. Sales of trucks, minivans and SUVs for the year totaled 12.2 million units, up 2.8% from the 2018 figure of 11.9 million units, as per a S&P Global Market Intelligence analysis.

Vehicle manufacturers were quick to exploit a loophole in the gas guzzler tax and its interpretation through regulatory agencies like the EPA that exempted "light-obligation trucks" from the law. Thus, the amount of gas guzzler tax collected by the U.S. in the fiscal year 2019 was under $43 million.

Features

• A gas guzzler tax is forced on passenger cars that don't meet least federal fuel productivity standards.
• The gas guzzler tax was presented in the Energy Tax Act of 1978.
• SUVS, minivans, and trucks are not subject to the tax.
• The tax is paid by manufacturers and importers of gas guzzlers.