Gas Guzzler Tax

Definition

The term Gas Guzzler Tax is used to describe a tax paid by manufacturers when a new car fails to meet minimum fuel economy threshold values.  The Gas Guzzler provisions found in the Energy Tax Act of 1978 were meant to discourage both the production as well as the purchase of fuel-inefficient cars, minivans, trucks, and sports utility vehicles.

Explanation

As part of the Energy Tax Act of 1978, manufacturers of vehicles that did not achieve at least 22.5 miles per gallon of gasoline (MPG) according to procedures outlined by the U.S. Environmental Protection must pay a Gas Guzzler Tax.  The calculation uses a weighted average fuel economy of highway (45%) and city (55%) driving.

The fuel economy values are determined before sales of the vehicle occur, and the tax is paid by the manufacturer to the Internal Revenue Service (IRS) for each vehicle that does not meet the 22.5 MPG threshold value.  The Gas Guzzler Tax assessed on each vehicle will appear on the window stickers of new cars and is meant to discourage the purchase of these vehicles.  The lower the fuel economy of the vehicle, the higher the tax as shown in the table below:

Vehicle Fuel Economy Gas Guzzler Tax
22.5 MPG or more $0
At least 21.5 MPG, but less than 22.5 MPG $1,000
At least 20.5 MPG, but less than 21.5 MPG $1,300
At least 19.5 MPG, but less than 20.5 MPG $1,700
At least 18.5 MPG, but less than 19.5 MPG $2,100
At least 17.5 MPG, but less than 18.5 MPG $2,600
At least 16.5 MPG, but less than 17.5 MPG $3,000
At least 15.5 MPG, but less than 16.5 MPG $3,700
At least 14.5 MPG, but less than 15.5 MPG $4,500
At least 13.5 MPG, but less than 14.5 MPG $5,400
At least 12.5 MPG, but less than 13.5 MPG $6,400
Less than 12.5 MPG $7,700

The manufacturers of gas guzzling vehicles include:  Aston Martin, Audi, Bentley, BMW, Bugatti, Chrysler, Ferrari, General Motors, Lamborghini, Maserati, Mercedes-Benz, and Rolls-Royce.

Related Terms

flat tax, progressive tax, expatriation tax, excise tax, ad valorem tax, tax treaty, FUTA, franchise tax, gross production tax, innocent-spouse rule, land value tax, household employer's withholding tax, luxury tax, non-resident entertainers' tax