Slight of Hand: EPA Fails To Adjust Gas Guzzler Tax Benchmarks To Match New MPG Numbers

Post by Kasey Kagawa

In a stunning blow for common sense, the EPA changed the way they test the fuel economy of all cars a few months ago, accounting for such wild and reckless behavior as driving at 80 MPH, running the air conditioning in 95ºF temperatures, and driving in 20ºF weather, all of which use more fuel than the standard tests. These changes won’t show up on cars until the 2008 model year, but at least it’s done, and we the consumers didn’t get screwed in the process.

Well, not entirely. As we lounged at 35,000 feet in the Dubspeed private jet, sipping the finest cognac in our silk smoking jackets and enjoying the services of the many fine dancing girls under our employ, Zerin mentioned the gas guzzler tax to me. It seemed to him that a decrease in MPG ratings across the board, especially if it reflects a more realistic rating, should lead to a corresponding decrease in the numbers on the tax schedule for the gas guzzler tax, yet this had not happened.

After our return to the ground, I navigated to the EPA’s website on the gas guzzler tax, and it turns out that he was right. The tax is assessed by multiplying the highway MPG by 45% and the city MPG by 55%, and then adding those numbers together and comparing the total to the tax schedule, which is published on the gas guzzler website. This tax is charged to the manufacturer, but it often is passed down to the consumer. The current tax schedule that is in place has been used since 1991, and there is nothing on the website indicating that it is under review as a result of the changes in the EPA gas mileage ratings, which means that more than a few cars are in danger of being bumped up to a higher tax bracket, even though their real MPG ratings haven’t changed one bit, just the way the government measures them. For example, the Chevrolet Corvette Z06 rings in with a 21.5 combined MPG, which is good for a $1300 charge, but with the new combined MPG of 19.95, it jumps up two brackets to cost $2100 per car. A manual Nissan 350Z scores 23.15 MPG and avoids the gas guzzler under the old ratings but with a 21.15 MPG on the new ratings, it also comes up two brackets with the IRS charging Nissan $1300 for every 350Z sold in the US, an amount that will undoubtedly be passed down to the consumer.

This is bad enough, but there’s an exemption in the gas guzzler tax. Guess what it’s for? That’s right, our old friends the truck, sport utility vehicle, and the minivan. All of these vehicles are exempt from the gas guzzler tax, which means that while those of us who drive reasonable transportation instead of 18-foot-long monstrosities with one person in them get screwed by Uncle Sam, the thundering idiot who thinks that a truck that you need a stepladder to get into is the pinnacle of the automotive industry can keep on buying vehicles that struggle to get their fuel economy into double-digits. If you’re looking into buying a four-banger, you should be pretty safe, but if your dream car has six cylinders or more, I’d buy it now, as it’s about to get a lot more expensive.

EPA Fuel Economy [US EPA]

Edit: Before you Corvette zealots jump all over me about the fact that the consumer doesn’t get charged gas guzzler for the Z06, remember that it’s the manufacturer that takes the hit. It’s up to them to pass it on down to you, and in this case, they obviously chose to eat the costs for PR purposes. If you don’t believe me, do the math.

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7 Responses to “Slight of Hand: EPA Fails To Adjust Gas Guzzler Tax Benchmarks To Match New MPG Numbers”

  1. April 17, 2007 at 10:21 pm #

    Zerin/ the guys of dunspeed, thank you for bringing this to my attention. Although we probably wont have a ounce of voice in it unless its still in the voting process. If its already passed we’ll just have to pay it which sucks

  2. uberR32
    April 18, 2007 at 2:27 pm #

    Kasey,

    I posted this on CF, and received one reply which seemed to ring a bell far off in the depths of my mind. Are you sure that the EPA uses the sticker values to calculate the tax?

    “Nope, this is completely wrong. The gas guzzler tax is based on the vehicle’s official fuel economy value used for the Federal Corporate Average Fuel Economy (CAFE) regulatory program. The fuel economy values provided on the vehicle label are not the values used for CAFE purposes. The label values are different (and lower) to better estimate “real world” fuel economy. The changed fuel economy labeling procedures EPA is implementing for the 2008 model year do not affect the fuel economy values used for CAFE or gas guzzler tax purposes.”

  3. uberR32
    April 18, 2007 at 2:32 pm #

    Here is a better source:

    “\39\ See 40 CFR 86.113-94.
    —————————————————————————

    3. Relationship of Today’s Proposal With Other Statutes and Regulations
    a. Automobile Disclosure Act. A provision in EPCA (at 49 U.S.C.
    32908(b)(2)) allows the fuel economy information to be included on the
    window sticker label of vehicle manufacturing and price information
    required by the Automobile Disclosure Act at 15 U.S.C. 1232 (the so-
    called “Monroni” label.). To that end, the Federal Trade Commission
    issued a “Fuel Guide” concerning the fuel economy advertising for new
    automobiles, published in the Federal Register at 16 CFR Part 259. This
    guide refers back to EPA’s fuel economy regulations and specifically to
    how manufacturers are permitted to advertise the city and highway fuel
    economy of their vehicles.
    b. Internal Revenue Code. This code contains the provisions
    governing the administration of the Gas Guzzler Tax.\40\ It contains
    the table of applicable taxes and defines which vehicles are subject to
    the taxes. The IRS code specifies that the fuel economy to be used to
    assess the amount of tax will be the combined city and highway fuel
    economy as determined by using the procedures in place in 1975, or
    procedures that give comparable results (similar to EPCA’s requirements
    for determining CAFE). Today’s proposal does not impact these procedures.”

  4. Kasey Kagawa
    April 18, 2007 at 7:02 pm #

    Hm. After some more research, it appears that you are right. I’ll put a correction up on the post.

  5. April 24, 2007 at 10:03 am #

    I have replicated this on ONET. Thanks for looking out for the car people. Zerin + DubSpeed.

  6. May 17, 2007 at 11:34 am #

    One more reason to keep driving my gas guzzling RX-7!

  7. Chris La Rosa
    October 6, 2008 at 10:41 am #

    Hello. I have a question with gas guzzler tax both from the past and for future reference. A few years ago I ordered an Audi that I knew had a $1700 gas guzzler tax. However, Audi forgot to put it on the Monroni label – window sticker for the first “batch” of cars to enter the states – mine being one of them and many people did not have to pay the tax.
    When my car was delivered, the salesman “misplaced” the sticker so I had no way on knowing if my car had the tax listed or not. Then I read on various Audi forums that many people ended up not paying the tax since it was omitted or left out from the sticker. Well, a month later, after many repeated attempts, the salesman finally sent me the original sticker for the car and wouldn’t you know – it had NO gas guzzler tax on it. Should I have paid for this tax anyway? Do you still pay for it in full on a leased car? Shouldn’t it be clearly listed on the invoices? Is gas guzzler tax a “taxable’ item – I was taxed on top of that.
    If you can answer any of these questions it would be very helpful. Thank you. Chris La Rosa

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