Energy Tax Act
The Energy Tax Act (Pub. L. 95–618, 92 Stat. 3174, enacted November 91978) is a law passed by the U.S. Congress as part of the National Energy Act. It was a response to three developments:
- 1. large revenue losses associated with the oil and gas tax preferences,
- 2. heightened awareness of environmental pollution and concern for environmental degradation, as well as
- 3. the oil embargo of 1973 (also known as the first oil shock) and the Iranian Revolution in 1979.[1]
The objective of this law was shift from oil and gas supply toward energy conservation; thus, to promote fuel efficiency and renewable energy through taxes and tax credits.[2]
Tax credits for conservation
This law gave an income tax credit to private residents who use solar, wind, or geothermal sources of energy. The credit is equal to 30% of the cost of the equipment up to $2000, as well as 20% of costs greater than $2000, up to a maximum of $10,000. There were also tax credits to businesses for renewable energy equipment, amounting to a maximum of 25% of the cost of the equipment.
The renewable energy credits of this law were increased by the Crude Oil Windfall Profits Tax Act of 1980.
Gas guzzler tax
The Act also created the gas guzzler tax[3] which applies to the sales of vehicles with official EPA-estimated gas mileage below certain specified levels. In 1980, the tax was $200 for a fuel efficiency of 14 to 15 miles per gallon, and was increased to $1800 in 1985. In 1980, the tax was $550 for fuel efficiencies of 13 mpg and below, and was changed in 1986 to $3,850 for ratings below 12.5 mpg. The Gas Guzzler tax only applied to cars under 6,000 pounds, which made the largest SUVs and other large passenger cars exempt from this tax, thus increasing the latter's popularity. Many argue that the 6,000 pound limit is actually counter-productive to the purpose of the Gas Guzzler tax by encouraging the use of large SUVs that avoid the tax due to their high weight. The following chart shows the tax for various levels of MPG as of 2006.
| Unadjusted MPG (combined) | Tax |
|---|---|
| at least 22.5 | No tax |
| at least 21.5, but less than 22.5 | $1000 |
| at least 20.5, but less than 21.5 | $1300 |
| at least 19.5, but less than 20.5 | $1700 |
| at least 18.5, but less than 19.5 | $2100 |
| at least 17.5, but less than 18.5 | $2600 |
| at least 16.5, but less than 17.5 | $3000 |
| at least 15.5, but less than 16.5 | $3700 |
| at least 14.5, but less than 15.5 | $4500 |
| at least 13.5, but less than 14.5 | $5400 |
| at least 12.5, but less than 13.5 | $6400 |
| less than 12.5 | $7700 |
The combined fuel economy MPG value (55% city, 45% highway) is used to determine tax liability. The MPG value is also adjusted slightly to account for differences in test procedures made since the base year, but it is not adjusted for in-use short fall. The unadjusted combined MPG of a vehicle can be approximated from the city and highway values provided in the Fuel Economy Guide by the following equation:
Since this is an approximate calculation, the actual gas guzzler tax may be off by one tax bracket.
See also
Notes
- ^ Lazzari, Salvatore; "Energy Tax Policy", Congressional Research Service of The Library of Congress, Updated April 22, 2005; page 6
- ^ Lazzari, Salvatore; "Energy Tax Policy", Congressional Research Service of The Library of Congress, Updated April 22, 2005; page 6
- ^ [http://www.fueleconomy.gov/feg/info.shtml#guzzler fueleconomy.gov}
External links
- Summary of energy laws, kannerandassoc.com
- Energy tax credits, colby.edu
- Legislation affecting the renewable energy market, doe.gov
- Congressional energy brief, ncseonline.org