NCPA - National Center for Policy Analysis


January 16, 2008

The new energy law contains stiff new fuel-efficiency standards for U.S. automakers. But make no mistake, what you got from Congress was a big tax hike, says Investor's Business Daily (IBD).


  • The Corporate Average Fuel Economy (CAFE) standards embedded in the Energy Independence Act require fuel efficiency to jump to a fleet average 35 miles a gallon in 2020 from about 25 mpg now.
  • According to General Motors Vice Chairman Bob Lutz, the cost per car of new CAFE standards is will be in the range of $4,000 to $10,000, with an average of about $6,000.
  • Put into perspective, the average cost of an automobile in 2006 was $27,958, so the new energy bill is, in effect, going to be a 21.4 percent tax hike on the current car prices.

There's more, says IBD:

  • New fuel-efficiency standards are supposed to clean up the air by encouraging people to drive cleaner cars, saving four million barrels of imported oil a day.
  • But in fact, the higher prices of cars will encourage consumers to keep their older, dirtier but cheaper vehicles for much longer; so the actual benefits will be less than forecast.

So this is what Congress in all its wisdom has brought us: A 21 percent tax hike on cars, coupled with an official policy that won't reduce fuel consumption, says IBD.  It's also bad economics, which is a typical outcome of congressional meddling. Through shortsighted, feel-good policies and excessive regulation, our government continues to drive up the prices of many things -- oil, food, cars and homes among them.  Then it blames others -- stupid consumers, greedy businesses, shady foreign operators -- for the bad results.

Source: Editorial, "The Tax They Didn't Tell You About," Investor's Business Daily, January 14, 2008.


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