This is slightly outside the realm of transit, but is definitely transportation related. As you probably already know, in the US we drive very large cars that use a lot of fuel. Venturing outside of the North America, one of the first things you might notice about cars is how few very large SUVs you see and how many more very small, so-called “mini-cars” you see. A variety of taxes on cars and fuel encourage large vehicles while discouraging smaller ones in the United States, at a cost of pollution and a massive send off of American treasure to oil exporting nations. With the US auto industry effectively in Federal receivership, it’s the best possible time for reform of our auto industry, and the laws that give incentive to large vehicles
Below the fold I’ll mention three ways the government could encourage lower fuel consumption or encourage smaller vehicles.
The United States consumes more oil than the next 20 largest economies in the world combined (at least according to the graphic to the left). Our economy is only about the size of the Japan, China, Germany and Great Britain combined, so our oil consumption is vastly out of scale with our economic output. More than half of that oil is imported, and our oil imports amount to half of our trade deficit, and the majority of the increase in the trade deficit in the last decade and a half.
If you take a look at the smaller graph in the image, it’s easy to see one reason why we consume so much oil. Gasoline costs 50% more in Japan than it does in the US, and nearly three times as much in the UK. Nearly all of the difference in price is the gasoline tax, an average of 53.6¢ a gallon in the US, but nearly $3 a gallon in the UK. Japan’s tax is about 90¢ per gallon, but I’ll talk about the way they encourage fuel savings below. The effect of a higher gas tax is not just that Britons drive less than Americans, it’s also that they drive more efficient cars. A higher gas tax in the US is the most obvious way to discourage gasoline consumption, and as a bonus, it would also bring in more revenue for the empty highway fund, providing much needed money for transportation infrastructure.
In US we also have very lax fuel standards on cars: the Gas Guzzler Tax only kicks in on cars that get less than 22.5 miles per gallon. 22.5 mpg isn’t very efficient, and the auto industry here has spent years lobbying to keep that number low. There’s also a particular whole-sale exception for light trucks, minivans and SUVs that has lead to a grotesque build up of the largest, least fuel-efficient cars in the world. When the tax was imposed in 1978, very few vans or light trucks were used for passenger purposes, but that quickly changed when large cars began to get taxed, but not trucks and SUVs. The Ford Excursion, which weighed more than three-and-a-half tons and had a 7 liter engine (some cars even had 8 liter engines recently), but only got 8 miles-per-gallon had no federal tax on its sale whatsoever. SUVs were the most profitable vehicles made in America, partly because of a much higher import tariff than other vehicles, and each of the aforementioned Excursions sold netted Ford $18,000 in profit. The then-powerful car-maker lobby fought hard to keep SUVs exempt from the tax.
Any car over three tons is exempted from the gas-guzzler tax, and light trucks and vans heavy than 8,500 lbs are exempted from CAFE standard measurements. The CAFE Standard system provides penalties to car makers whose fleet of cars have a sales-weighted fuel economy average of less than 27.5 mpg. There has been some movement in the last few years toward higher fuel standards and an expansion of CAFE standards to heavy cars, but the action has been slow and largely symbolic. While SUVs have fallen way out of fashion in the past couple of years due to higher fuel prices and global warming concerns, tons are still being sold, and there’s no reason to continue the exemption for SUVs, especially with the auto lobby as weak as it is today. CAFE standards don’t act on consumer preferences, but rather force cars makers to make some high-mileage vehicles. Since the Gas Guzzler Tax only applies to a very small number of large cars or sports cars, the only incentive for buying a fuel efficient car is the price of fuel itself.
Here in Japan*, however, the government has effective mechanisms to provide incentives for consumers to choose smaller cars. First, there’s a tax on the gross-tonnage a vehicle has when it’s sold and during a required bi-annual maintenance exam, so large cars cost proportionately more as they get bigger and the cost lasts the lifetime of the vehicle. Second, there’s a special sort of annual MVET that is based on the engine displacement, so cars with larger engines cost more to register each year than cars with smaller engines. Not just that, there are specific deductions for cars with very small engines (0.66 liters or smaller [even trucks]) and cars with exceptionally high fuel economy. Both engine displacement and gross tonnage have a very strong correlation with fuel economy – it’s nearly one for engine displacement – so both of these mechanisms provide strong incentives for consumers to purchase fuel efficient cars. The system works here in Japan, and while 0.66 liters might be too small for Americans, there is some value that would work. 1.5 liters certainly isn’t too small.
So there are three easy ways to reduce oil consumption in America. First, we could raise the gas tax, which would encourage people to drive less or to drive more efficient cars. Second, we could eliminate loop holes in our current fuel economy programs that make the system ineffective. Lastly, we could push the onus of fuel economy decision making onto the people purchasing cars, which has one advantage (or disadvantage, depending on how you see it) of moving the taxes onto new cars so that it wouldn’t punish people who purchased less efficient cars in the past. In the past it would have probably been politically difficult to do any of these three, but the Big Three’s government assistance has finally given the opportunity for serious reform. Let’s hope we take advantage of it before gas becomes expensive again.
*Clarification: I was in Japan when I wrote this, but not when it was published. -Andrew
Ah yes, lets force Americans into cars they do not want. To bad little things like freedom get in the way of this.
This is not about “forcing” anyone into anything. It’s about encourage cars that are fuel efficient while discouraging vehicles that waste fuel.
And there’s nothing free about a no taxes on giant SUVs and taxes on smaller ones. Maybe I want a small car! I don’t get freedom but SUV drivers do?
The taxes on small cars should be repealed. The only taxes on cars should be the sales tax at the time of purchase. If the goverment puts in place taxes to nudge people into certain cars that is social engineering. I am against that. It is goverment sticking its nose where it does not belong. That violated my freedom.
That is just silly, Matt. “social engineering”? What car people can afford to buy? A car?
Explain to me how to me how driving a minivan versus a suv is going to change your social attitude or our society? Give people incentives to buy smaller cars and social change is just around the corner?
Give me a break.
Ridiculous. Genocide is social engineering, Mathew. The fact that doufous talk radio types have coopted that phrase in their critique of “big government” or the “nanny state” doesn’t strengthen your argument.
If the law recognizes common value in one of two or more choices and incentivizes the choice supporting common value (say, decreasing carbon-based emissions and conserving fuel), that’s good public policy. If your individual choice is the alternative that does not support common value (say, increasing carbon-based emissions and increasing individual fuel consumption), you still have that choice. There is absolutely no impairment of your “freedom” or “liberty” or whatever you want to call it.
So go ahead and buy yourself a one-ton dually, jack up the suspension on that already ponderously heavy and non-aerodynamic sum’bitch. Throw on a set of giant-assed off-road tires, step on the throttle, and accelerate that V-10 down to two MPG, all while hauling around a pile of air and your own self. You still have that choice. No social engineering.
Look, if you want to make a public policy argument, make it a public policy argument. Resorting to AM talk-radio cliches does nothing to advance the discussion.
Genocide is an extreme version of social engineering, probably the most extreme version.
If you made cars illegal or only legal in certain places, maybe that could be social engineering, but making some cars cheaper than others to encourage people to save on fuel, but not necessarily to drive less isn’t social engineering.
Building roads is social engineering. Perhaps we should stop doing it.
Take a look at the sales of small cars before saying that Americans don’t them:
http://www.nytimes.com/2008/05/02/business/02auto.html
If people want an SUV that is there business. The goverment should not be trying to take people who drive SUVs and try and get then into small cars that may not be practical, my Pastor, for example, has 5 kids with another on the way. How is a Small car going to help him. His 1994 Suburban makes more sense for him. He drives a mid 90’s sable when he is alone. That is the best car that he could afford.
Also the best selling hybrid is the Prius. Toyota has to sell them at a loss.
Explain this to me, Mr. Renner. Even if you believe that anyone who wants an SUV should get one, why should the government encourage then over cars? Today it does just that.
Second, I have four brothers and five sisters. We managed to get around in Minivans with much smaller engines and better fuel economy than your pastor’s SUV. So there are other options for drivers with lots of passengers than SUVs.
No one knows whether the Prius is being sold at a loss. Considering that this could violate WTO rules, do you have evidence to support your claim?
If people want an SUV, it is their business — but there shouldn’t be tax incentives for owning an SUV compared to a small car. In fact, more fuel-efficient cars should give us the tax break since they reduce the national dependence on foreign oil.
For all that pitter patter about “Freedom! Freedom!” there seems to be no serious talk about what we mean by that. Freedom of consumption/indulgence is not or should not be as high on the list as Freedom of speech, of religion, movement, habeas corpus, the right to vote and so on. We provide ridiculous breaks and subsidies to cars that are not efficient and to driving in general and expect those subsidies to remain in place forever and ever and say “It’s my freedom!” What’s that got to do with freedom? It’s ‘individual mobility’ which is distinctly different from ‘freedom of movement’. At the same time our self-indulgence in oil use endangers the real freedoms that should be so dear and near to us. Thirty ago we had a real opportunity to turn it around but now we have a military budget of $500b/year, a hundred military bases in the Middle East, a “PATRIOT Act”, etc as a result of keeping this dysfunctional trade deficit and reliance on foreign oil and credit going at all cost. Where is the freedom in that?
Those subsides that you talk about shouldnot exist. They are wrong. Auto manufactures should sell the cars that people want to buy. If they cannot get them to buy them then they should go out of business.
The military budget is the only area of the Federal Goverment that I want to see increased. One member of the armed forces serving in Iraq has done more to protect our freedom and liberty than the congress, the supreme court, the president and the ACLU combined.
new technology needs to be developed forour future. With the free-market it will happen. If the people demand something the industries will follow, if they want to stay in business. Until that time comes we need oil. Oil is the life blood of the world economy. We should be drilling for it here. We can get it safely. The only reason we don’t is those who feel that we need to be in the dark ages prevent it. Drill here and drill now. Now a popular opinion on this blog I know but it is mine.
So you’re advocating the military-industrial complex, harping on drilling with little regard to the supply-side reality of the petroleum industry and saying that freedom is directly related to foreign wars.
First off, your “free market” cheerleading forgets that petroleum and the military are not free market at all, a series of favors keeps these industries propped up. Several firms getting funds are redundant, including multiple contract holders for the Alaskan Pipeline and various terminals throughout the Houston area, all because of favors.
Secondly, the notion that SUVs are what people want to be ignores completely the reality that until the late 80s and early 90s and again in the early 00s, small cars were taking the lead. You say we shouldn’t subsidize SUVs but that people want them? No, people who need them get them, but by and large, the demand only exists due to the rafts of money floated to their divisions by the feds. Otherwise, economy rules all. Without subsidy, a lot of people wouldn’t be able to afford them.
A lot of people advocating a free market know it won’t happen and they know that if it were a truly free market they’d be under water so fast they’d think the CIA had got them.
All this harping about the free market and “let people drive what they want to drive” misses the point that the auto industry is already getting subsidies, why not put some taxes in effect that encourage healthy growth.
Nobody is saying you can’t buy an SUV. I read the article. He simply believes (as I do) that the government might do well to encourage less wasteful forms of transport. The foreign wars you talk of would be less dangerous if we weren’t spending oil money to arm our enemies. As it is, we have a lot of angry enemies who are well funded by Saudi and Iranian oil tycoons.
SUV’s are still legal in all the countries he mentions. Nobody is saying you can’t buy one. But, we’re saying you should have to pay a fair value for the damage you’re doing to the environment, our economy, and our national security by driving one.
The gas tax is a bit about paying for the damage to the environment, but the other two are just about encouraging people to drive more efficient cars.
“The military budget is the only area of the Federal Goverment that I want to see increased. One member of the armed forces serving in Iraq has done more to protect our freedom and liberty than the congress, the supreme court, the president and the ACLU combined.”
Are you serious? Please tell me you’re not serious. The war in Iraq has nothing to do with our freedom other than subsidizing your freedom to drive around in an SUV on $2 a gallon gasoline. The founding fathers would be rolling in their graves if they knew how subservient we have become to the Middle East.
good post, to me Freedom means not letting the Middle East (or anyone) have control over our countries economy. Instead of spending a trillion in Iraq a trillion could have been spent on helping us produce the energy we need. It sad that it’s more politically acceptable to invade a country then invest in our own.
Andrew is right!
Our congress, fawning over fat contributions from the auto and oil industry, have created an incentive system that puts logic on its head.
No tax for Hummers, but buy a civic and we stick it to you? Where’s the logic in that?
Buy a 6 passenger pickup to avoid taxes on the 6 passenger car? Come-on!
Big cars, trucks, SUV’s, and anything else moving down the road weigh more and get less mileage. Taxes should be based on vehicle weight, to account for higher costs to maintain the roads by heavier vehicles. That’s fair, isn’t it Matt.
You want a Hummer. Fine, that’s your freedom of choice. Just pay a flat fee to do so, and quit asking me to subsidize your choice.
America uses 25 barrels of oil per capita per year (US-Energy Offfice, 2006). France, Germany, and U.K are 10-12. China is 2. Japan is 15.
Level the playing field for smaller cars, and Econ-101 will kick in.
In Europe, most cars have hitches in back. I have seen them use trailers to haul home refrigerators, sofas, wall units, etc. on them. They either have one of their own, borrow a neighbours, or rent them as needed.
As someone who is part of the solution (by living within walking distance of work), and not someone who is part of the problem (must drive or take transit to work), I’d like to see people taxed based on the distance they live from work. Someone who is part of the solution, like myself, wouldn’t be taxed at all. But someone, let’s say a Microsoft employee who works in Redmond, but chooses to live in Seattle, would be taxed an extra $5000 per year, for the damage he is doing to the environment.
No.
Not a practical solution, Sam. Too much inequity. You would propose to tax say, a public employee, who, because of his or her public salary can’t afford to live in the community they serve. Say a school teacher in the Mercer Island School district, or a cop in Medina’s precinct, or a fire fighter at Station 29 in Alki?
Or a married couple whose jobs are not in the same place
Or someone who lost their close-to-home job and had to take a job farther from home. People don’t always get to pick and choose their jobs or are able to sell their house on a whim and move closer to work.
I applaud you for having the means and making the choice to be “part of the solution.” I want to believe that the example you offer indicates the truer sentiment and direction you intended, but the solution you arrive at is hugely problematic. Equating environmental damage done by transit and driving a car is a stretch. Assessing taxes based on relative distance to work is just plain ridiculous. You seem to miss the fact that for many people the “choice” to live proximate to work is simply not feasible due to a combination of wages and the availability of affordable housing. Taxing those who have no choice but to rely on public transit to reach their place(s) of work or housing that is affordable is entirely misplaced and unnecessarily punitive.
I work at Microsoft in Redmond and live in Seattle but I work from home a lot. Should I pay $3000 a year? What if I worked from home every day?
What if you bicycled to work? Should you get a rebate? The distance thing would be terrible to manage. Microsoft would just open an “office” with Starbucks everywhere.
And every time you drag that out instead of a workable solution, you make your other opinions less valued by those who read you.
You missed my point. Maybe I wasn’t being clear. It’s that if you tax something, like distance from worker to work, people and corporations will try to get around it. Like opening lots of small branch offices, ie Wifi for Microsoft employees at Starbucks. Instantly every Starbucks is a branch office…no tax. And it doesn’t fix what we want. We have to be very careful for the creation of unintended consequences.
If we want people to bicycle more, we need to make it easy to do so..like maybe not charging for the ride across 520? (One stop at Montlake and One at Hunts Point) For those of us with employer supplied passes it’s no big deal but for everyone else…
Out of curiosity, if Microsoft decided to move your position to Seattle would you move?
I like the idea of incentives to live near work, but it’s pretty complicated. For example, I now work in SLU (815 Mercer) though I also still use a cube at the main UW campus (to which I can walk). We’re open to moving but there don’t seem to be any good options right now. If someone was providing housing incentives or just cash it might be workable.
Note that right now there are actually federal tax incentives to purchase a home, but many lower-middle income workers can only afford to live in outer suburbs. In other words, people currently get tax breaks to live far from work!
On the social engineering via the tax code:
I like the gas tax & vehicle weight taxs. That tends to put the pressure on the low mileage SUV’s. And it puts the right pressure on the problem. We want to fix the balance of trade and importing oil is one of the problems (gas tax). Road repairs are directly related to vehicle weight. So this way it balances out, if you need a large vehicle ok, buy one. Are you penalized if you don’t drive it much? Not as much as if it were only based on vehicle weight and value. (think about those RV’s that get driven twice a year for a total of 4 weeks.)
Currently the state puts some penalty on the trailer option by having the weight and an extra license fee. But it’s not outrageous.
I’d just end the tax break for those huge vehicles that are really passenger cars/trucks and not “business breaks.” Businesses that need large vehicles can just pass along the cost which is as it should be.
I think that if we actually made the gas tax high enough to pay not only for building new stuff, but also for the eventual replacement costs of everything we already have, we might have a better balance already.
I can agree to that. With one cavet some sort of rebate to the poor for transit passes. Like we give out food stamps we could give out bus passes for those who qualify.
Isn’t it interesting that after generations of public bailouts and other benefits for US auto and the types of cars they push, people don’t consider THAT social engineering?