What Legislation Put a Tax on Gas Guzzling Automobiles?
The Gas Guzzler Tax is a federal excise tax originating from the 1978 Energy Tax Act. It applies to new, low-MPG cars and is paid by the manufacturer.
The federal tax on fuel-inefficient automobiles, known as the Gas Guzzler Tax, was established by the Energy Tax Act of 1978. This legislation was a direct response to the 1970s energy crisis. Congress enacted the law to promote the development and purchase of vehicles with better fuel economy, thereby reducing national gasoline consumption and creating a financial disincentive for cars that did not meet fuel efficiency standards.
Vehicles Subject to the Tax
The Gas Guzzler Tax applies exclusively to the sale of new passenger cars. The law’s definition of a “car” excludes several vehicle categories, including minivans, sport utility vehicles (SUVs), and trucks. This exemption exists because, at the time the law was written in 1978, these types of vehicles were used more for commercial or work-related purposes and represented a small portion of the passenger vehicle market.
The Environmental Protection Agency (EPA) determines whether a vehicle is a passenger car for the purposes of this tax based on its design characteristics. The tax is levied only on new vehicles, so the sale of used cars does not trigger the tax. This focuses the program’s impact on the manufacturing and initial retail stages.
Tax Rate Structure and Payment
The Gas Guzzler Tax is triggered when a new passenger car’s combined fuel economy rating, as determined by the EPA, falls below a threshold of 22.5 miles per gallon (mpg). The tax is not a flat rate; it employs a tiered structure where the penalty increases as the vehicle’s fuel efficiency worsens, with the most inefficient vehicles incurring the highest tax.
The tax rates begin at $1,000 for a car with a fuel economy rating of at least 21.5 mpg but less than 22.5 mpg. The amount rises progressively, with vehicles rated between 17.5 and 18.5 mpg incurring a $2,600 tax. The penalties reach the maximum tax of $7,700 for cars that have a fuel economy rating of less than 12.5 mpg.
The legal responsibility for remitting the tax payment to the Internal Revenue Service (IRS) rests with the vehicle’s manufacturer or importer, not the consumer. The tax is reported on Form 6197, Gas Guzzler Tax. The manufacturer or importer must file this form with their quarterly federal excise tax return.
Consumer Disclosure Requirements
While the manufacturer or importer is legally obligated to pay the tax to the IRS, this cost is typically passed on to the car buyer. The tax amount is incorporated into the vehicle’s purchase price. Federal law requires that the specific amount of the tax be clearly disclosed to the potential buyer.
This disclosure is made on the vehicle’s window sticker, officially known as the Monroney label. The label must list the Gas Guzzler Tax as a separate line item if the vehicle is subject to it. This ensures that consumers are aware of the specific cost associated with the car’s lower fuel economy before making a purchase decision.