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Energy Tax Act
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The Energy Tax Act (Pub.L. 95-618, 92 Stat. 3174, enacted November 9, 1978) is a law passed by the U.S. Congress as part of the National Energy Act. 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.[1]
Contents

1 Tax credits for conservation
2 Gas guzzler tax
2.1 Economic impact
2.2 Market impact
3 See also
4 Notes
5 External links

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[2] 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 (2,700 kg), 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 (2,700 kg) 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 tax is collected by the Internal Revenue Service (IRS) and normally paid by the manufacturer or importer. 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[citation needed]:

\mathrm{Unadjusted MPG (combined)} = \frac{\mathrm{1}}{\mathrm{ \frac{\mathrm{.495}}{\mathrm{City MPG}} + \frac{\mathrm{.351}}{\mathrm{Highway MPG}} }} + .15

Since this is an approximate calculation, the actual gas guzzler tax may be off by one tax bracket.

We can then find out how much penalty, \mathit{p_t}, the manufacturer has to pay for that particular vehicle by using the following equation. \mathit{p_i} needs to be looked up on the table above[clarification needed] and \mathit{q_i} is the numbers of cars that are found to be under the set Gas Guzzler standard,

p_{t}=\sum_{i}{p_iq_i}\,
Economic impact

Gas guzzler tax creates incentive to meet the minimum MPG requirement by manufacturer. Due to elimination of vehicles that are below minimum MPG which is 22.5 MPG, vehicle sales have decreased approximately 0.5 percent. However, sales revenues increase by a greater amount due to the added value in vehicles making greater use of fuel economy technology.[3] Currently, the additional cost of efficient hybrid systems range from $2,000-$10,000 on the vehicle sticker price.[4]

Manufacturers benefit from the increase in price of products. However, the fuel sector may lose revenue if the increase in sales and production of fuel efficient vehicles doesn't just encourage people to drive more.