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Toward A Brand & Technology Neutral Gas Saving Tax Incentive

| Friday April 28th, 2006 | 2 Comments

Forget sending everyone a check for $100. What might Congress do that could benefit anyone, be flexible, and reduce per capita gasoline consumption year after year? By now most people have figured out that the only hybrid car that makes economic sense to own and is widely available is the Toyota Prius. A tax code that favors hybrids benefits primarily one brand and technology. That leaves out every other maker and other worthy technologies like diesel. Given the poor likelihood of picking up a used hybrid, what Congress has been considering in the last week is so far off the mark from being fair and of value for most drivers it’s laughable. What approach would solve all these problems? Here’s a hypothetical approach that could work for everyone and drive positive, continuous change.


When a car is inspected for safety and emission standards, the mechanic notes the mileage and calulates how many miles were added since either last year’s inspection or since time of purchase. Owners get a printed report of the miles added for each vehicled during the preceding tax year, just like a “W2″ form. There’s a copy for each governmental jurisdiction and one for the taxpayer/car owner’s records.
The deduction report includes a miles-squared per gallon-year (M2/Gal*Yr) figure which represents the accumulated miles per tax year times the EPA reported average miles per gallon figure for the vehicle. This number enables a performance-based, vehicle specific, brand and technology neutral, tax deduction. An owner gets one report for each vehicle he/she is registered owner of. The user must determine which vehicle to file the deduction for. Only one is allowed.
The government annually publishes a lookup table with a “hockey stick” curve function relating tax deduction level to M2/Gal*Yr. The larger the M2/Gal*Yr figure is, the higher the deduction. A person might own several vehicles but, remember, he/she can only file for a deduction on one of them. And logically, he/she will realise that the M2/gal*Yr will be optimal on the most efficient vehicle in the family garage if it is driven as much as possible.
In the early years of the program, when the government wants to drive the market toward provision of more efficient models at a wide range of prices, the curve is particularly steep in the last, highest third of it’s range: deductions go up very steeply for a small incremental efficiency improvement near the high end. When the market has a wider range of price and performance to offer, the curve can can be made less steep at the end.
Because the deduction is predicated on a published non-linear equation, it can be used by business fleets as well as private owners to model their tax strategies for each quarter or year ahead. Because it is a brand and technology neutral mathematical model, using a fairly complex algorithm, there would be fewer opportunities for lobbyists to make last minute, brand-specific back door revisions in committee markup. Any “tweaking” would provide transparent results as soon as the proposed revisions were published. No room for speculation and semantic games.


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  • Terry

    So…. how is this really different from a gas tax?

  • john Laumer

    It is an incentive instead of a disincentive. Poor and middle class people who need to drive to their jobs and shop for groceries do not need any further disincentives. That is a critical difference, as high gas prices have the greatest adverse impact on those with the lowest disposable incomes.
    This approach encourages more efficient vehicle purchase (including used cars) and better choice in terms of how far a person drives and with which car. In that sense it competes with a gas tax. But being brand and technology neutral as well as a personal incentive, it would obviate the need for all those back door lobbyist driven “markup” bill additions that are only in the interest of the wealthiest corporate donors or the elected officials re-election campaign. This enables small entreprenuers and inventors a to get a footing.
    Finally, a gas tax puts huge amounts of revenue into the general treasury, providing temptation for Congress to redirect it to pet causes. Do you really believe that additional gas tax monies would remain dedicated to mass transit improvements and alternative energy research? If history is any lesson the opposite would be true.