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. with poor fuel economy ratings. Paid by vehicle manufacturers or importers, this tax ranges from $1,000 to $7,700 depending on the miles-per-gallon (mpg) efficiency of the car.
Interestingly, the tax does not apply to trucks, sports utility vehicles (SUVs), or minivans. This exemption dates back to 1978 when these vehicle types were rare as passenger options.
History and Purpose
Introduced by Congress in the Energy Tax Act of 1978, the gas guzzler tax aims to discourage the production and purchase of fuel-inefficient vehicles. Back then, staggering fuel prices and diminishing U.S. oil production necessitated measures that promoted fuel-efficient cars. The legislation intended to push consumers and manufacturers toward more sustainable choices.
Key Takeaways
- A gas guzzler tax is imposed on passenger cars that don’t meet federal fuel efficiency standards.
- The tax burden falls on manufacturers and importers of gas guzzlers.
- SUVS, minivans, and trucks are exempt.
- This tax was introduced to incentivize fuel economy.
Understanding How the Gas Guzzler Tax Works
To escape the gas guzzler tax, a car must achieve at least 22.5 mpg in combined city and highway driving. The tax amount hinges on how poor the vehicle’s fuel economy is. Cars just below the 22.5 mpg mark are taxed $1,000, while cars with less than 12.5 mpg are taxed up to $7,000. The tax details are recorded on IRS Form 6197 after the production year concludes.
Vehicles Affected by the Gas Guzzler Tax
Typically, high-end luxury and sports cars, including models from Aston Martin, BMW, Ferrari, and Rolls-Royce, face this tax. American muscle cars like the Chevrolet Corvette and certain variants of the Ford Mustang also fall under this category.
Fuel Efficiency Testing Protocols
The U.S. government offers a Fuel Economy Guide for those interested in vehicle fuel economy. Both manufacturers and the EPA use uniform tests for fuel efficiency, though calculations differ slightly. Adjustments reflect real-world driving conditions, versus laboratory conditions, affecting mpg values displayed on car labels.
Examining the Loopholes and Exemptions
When the gas guzzler tax was enacted, SUVs were not in vogue. Introduced mid-1980s, SUVs, trucks, and minivans saw a later rise in popularity, exempting them from the tax.
Today’s market trends show a preference for SUVs and trucks, reflected in U.S. automotive sales. This loophole means numerous popular vehicles dodge the gas guzzler tax, reducing the overall tax collected. In 2019, revenue from this tax was under $43 million.
Concluding Thoughts
While the gas guzzler tax aims to promote fuel efficiency, it leaves today’s popular vehicle categories untouched. Savvy consumers and eco-conscious manufacturers continue to navigate within regulatory frameworks to balance desires for luxury and sustainability.
Related Terms: Energy Tax Act, IRS Form 6197, EPA Fuel Economy Guide, Automotive Industry.
References
- Internal Revenue Service. “Form 6197: Gas Guzzler Tax”.
- Environmental Protection Agency. “Gas Guzzler Tax”.
- Govinfo. “Public Law 95-618 95th Congress A”, Pages 7-8.
- Office of Energy Efficiency & Renewable Energy. “FOTW #1183, April 26, 2021: New Cars Purchased with Low Fuel Economy Ratings Continue to be Assessed a Gas Guzzler Tax”.
- Internal Revenue Service. “Form 6197: Gas Guzzler Tax”.
- United States Environmental Protection Agency. “Vehicles Subject to the Gas Guzzler Tax for Model Year 2016”.
- Environmental Protection Agency. “Gas Guzzler Tax”, Pages 1–2.
- Environmental Protection Agency. “Gas Guzzler Tax”, Page 2.
- Office of Energy Efficiency and Renewable Energy. “Fact #915: March 7, 2016 Average Historical Annual Gasoline Pump Price, 1929–2015”.
- U.S. Energy Information Administration. “U.S. Field Production of Crude Oil”.
- Office of the Historian. “Oil Embargo, 1973–1974”.
- Congressional Research Service. “Tax Preferences for Sport Utility Vehicles (SUVs): Current Law and Legislative Initiatives in the 109th Congress”, Pages 11–13.
- Jeep. “History: 1980–1989”.
- S&P Global. “US Auto Sales Decline 1.4% in 2019; Car Sales Plummet as Trucks, SUVs Gain”.
- Internal Revenue Service. “SOI Tax Stats - Excise Tax Statistics”, Download Fiscal Years: 1999–2020.
