Wednesday, November 5, 2008

A strategy for taxing vehicles

More and more U.S. citizens are owning up to the fact that fuel-inefficient vehicles are a bad idea. Some have long maintained that they are poor stewardship, and as gas prices have climbed (and even as they have settled back down, a little) many others have joined that position.

Thus, I offer the following modest proposal to solve several problems at once:

An annual federal property tax should be assessed on vehicles that fit criteria deeming them fuel-inefficient.

Here’s how it would work:

  • All vehicles would immediately be subject to the tax. (Any vehicle may qualify for exemption based on a set of criteria-- see below.)
  • Any vehicle with a fuel efficiency rating of 20 MPG or higher* would automatically be exempt. This rating would increase on a regular basis (more on this in a bit).
  • Any vehicle that is registered as an antique would automatically be exempt.
  • Any driver may also qualify for exemption of one or more vehicles, as long as he/she can demonstrate that circumstance require them to drive that vehicle (more on this in a bit).
  • Any driver may also qualify for exemption of one or more vehicles, as long as he/she can demonstrate that the vehicle was used for carpooling to work for a certain percentage of the mileage driven.

So, for example, a farmer, general contractor, or other laborer who uses a pickup truck for his daily work would qualify for exemption and would pay no tax. A family with more than two children that owns a minivan would qualify for exemption and would pay no tax. A working musician whose performances require him/her to carry gear in a full-sized van would qualify for exemption and would pay no tax. And if any of these can demonstrate that multiple such vehicles all fit the exemption qualifications (a farmer with more than one working truck on his farm, for example), all would be exempt. Commercial vehicles would automatically be exempt.

Furthermore, any individual or family who preferred a larger vehicle such as an SUV or a pickup truck would be free to own one, or as many as they would like-- they would simply have to pay a tax for it. Those who want them for recreational purposes would likewise be free to have as many as they want, provided they pay the taxes. (The exception of cars and trucks registered as antiques is not a threat to the integrity of the concept, since such registration includes a mandated limit on mileage driven per year.)

The tax would need to be a high enough rate-- $200 or $250 annually, perhaps-- that would deter folks from casually or thoughtlessly buying a gas-guzzler. Every year, the MPG rate should increase by a mile or two, to “encourage” the auto makers to improve on the fuel efficiency of their vehicles.

The proceeds from this tax should be split three ways:
  • Up to would fund an annual tax credit for drivers of high-MPG vehicles such as scooters, hybrids, and electric cars (50 MPG or more). The remaining amount would be divided evenly between the other two efforts:
    • ½ would subsidize gas costs to keep prices affordable, so that the economy isn’t affected so drastically as it was over the past year.
    • ½ would support government-funded research into alternative fuels and renewable energy sources.
If the tax was set at $250 annually, and in the first year only 20% of vehicles were not exempt, this would generate more than $12.5 billion of tax revenue in the first year. If the high-MPG tax credit was $500 per year, this would only require $1.8 billion, leaving more than $10 billion to lower gas prices and develop better energy and fuel sources.

It might not be a perfect system, but I think it would be a good move.

*The average Miles per Gallon (MPG) of passenger cars in 2006 was 22.4, while “other 4-wheeled vehicles” averaged 18.0 that year. Since that was two years ago and the average, it is safe to assume that most cars and even trucks would qualify for this exemption initially.

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