Gas-GuzzlerTax is what?

Vehicles with low fuel efficiency in the U.S. are subject to the gas guzzler tax. The car producer or importer pays a $1,000 to $7,700 tax according to its miles-per-gallon efficiency.

The gas guzzler tax applies to passenger automobiles, not trucks, SUVs, or minivans. The 1978 law applied to uncommon passenger automobiles with such types.

Congress created the gas guzzler tax in the 1978 Energy Tax Act to discourage fuel-inefficient vehicle manufacturing and purchasing.

Gas-Guzzler Tax: How Does It Work?

To avoid the gas guzzler fee, a car must score 22.5 mpg in city and highway travel.

The tax depends on how much gasoline the automobile uses. So, lower fuel economy, more tax. The maximum tax rate is $7,000 for automobiles under 12.5 mpg, while those below 22.5 mpg are $1,000. The IRS Form 6197 reports the tax. Reporting occurs after the manufacturing year, when the total quantity of cars is known.

The window sticker will show the amount if the automobile is subject to the gas guzzler tax.

Which cars pay gas guzzler tax?

The EPA listed new automobile models liable for the gas guzzler tax until 2016. It has not released one since; however, the 2016 gas guzzler list shows the automobiles liable for the levy.

The bulk are luxury and sports automobiles from Aston Martin, BMW, Ferrari, and Rolls-Royce. Also included were the Chevrolet Corvette and one Ford Mustang.

Tests for Fuel Efficiency

For fuel efficiency information for U.S. vehicles, consult the government-published Fuel Efficiency Guide for each model year since 1984.

Manufacturers must apply the same EPA test for the gas guzzler tax and new automobile fuel economy labeling. Different computation methods exist. The EPA applies an adjustment factor to fuel efficiency test results for labeling but not taxing.

The modification reflects real-world driving versus lab testing. This is known as the in-use shortage. The Fuel Economy Guide and fuel economy labels use three of the usual fuel economy tests to compute the gap.

The tax liability’s combined city and highway fuel economy is greater than the Fuel Economy Guide and new car window stickers since it does not account for the in-use deficit.

Gas-Guzzler Tax Issues

In 1978, the gas guzzler tax raised gasoline prices by 75% from six years earlier. The decade saw U.S. oil output peak in 1970 and plummet progressively as demand climbed.

The 1973 OPEC oil embargo hurt U.S. and international consumers. The decade was known for gas shortages and price hikes.

This was the gas-guzzler tax’s context. It encouraged fuel-conscious consumer expenditure and manufacturer efficiency.

Gas-Guzzler Tax-Exempt Vehicles

Jeep’s 1984 Cherokee XJ is considered the first SUV. Over the following 30 years, the SUV became the most popular vehicle in the U.S.

American customers preferred trucks and SUVs over automobiles in 2019. Nonseasonally adjusted U.S. passenger automobile sales fell 10.9% to 4.7 million in 2019 from 5.3 million in 2018. S&P Global Market Intelligence reported 12.2 million truck, minivan, and SUV sales, up 2.8% from 2018.

Automakers took advantage of the gas guzzler tax’s exemption for “light-duty trucks” by regulatory authorities like the EPA. Thus, the U.S. collected less than $43 million in gas guzzler taxes in 2019.

Conclusion

• Passenger automobiles that don’t fulfill federal fuel economy regulations are taxed.
• Gas-guzzler makers and importers pay the tax.
• The tax does not apply to SUVs, minivans, or trucks.
• The 1978 Energy Tax Act imposed the gas guzzler tax.