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What Is the Gas Guzzler Tax?

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Modern vehicles are far more efficient and eco-friendlier than they used to be. In decades past, cars could burn through a tank of gasoline within a week, which gave the limited supply of fossil fuels and worsening air quality dire projections.

The automotive industry has gradually improved vehicle efficiency over the past 40 years, and that all began in the 1970s when Congress passed the Energy Tax Act of 1978. In it, the government established the gas guzzler tax — a fee which still applies today.

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Explanation of the Gas Guzzler Tax

The Energy Tax Act of 1978 amended the Internal Revenue Code to incentivize companies and consumers to conserve energy and pursue alternative energy solutions. Many of the tax breaks and penalties still applicable today originated in those laws, like tax incentives for organized carpooling.

The Energy Tax Act of 1978 included a targeted measure to dissuade manufacturers from making gas-guzzling cars — and consumers from buying them. The Gas Guzzler Program imposed a fee on manufacturers for vehicles they produced with an MPG rate below a certain threshold, as evaluated by the EPA (generally, it’s less than 22.5 mpg).

The tax is passed along to the consumer during the vehicle sale, typically costing $1,000-$1,500. The amount is posted on the window sticker for the buyer to see beforehand. The amount varies because it depends on 1) that particular model’s combined city/highway fuel economy and 2) the number of gas-guzzling cars produced that year by that manufacturer.

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In 1978, many passenger cars were impacted by the gas guzzler tax, but over time, fewer and fewer models fall below that MPG threshold. Modern models subject to the gas guzzler tax are all high-performance sports cars from European luxury brands, limousines, and American muscle cars.

Trucks, minivans, and SUVs are actually not subject to the gas guzzler tax because the provision only covered passenger cars — and none of those segments were popular passenger vehicles in 1978. Many more modern vehicles would be subject to the tax were the Energy Tax Act revised today.

If you import a vehicle into the U.S. with low fuel economy, it must be certified to be drivable by the DOT and EPA before you can take it on American roads — and that includes paying the gas guzzler tax.

Sources: EPA, Electronic Code of Federal Regulations, Buying a Car for Dummies