China's New "Gas Guzzler" Tax Based on Engine Size

Here’s a fascinating experiment in the arena of social economics: imagine your country cuts the sales tax rate on fuel efficient vehicles in half, from 10% to 5%. You’d figure the average consumer would be lining up to buy one of these subsidized, fuel-efficient cars, wouldn’t you?

If you did, you’d be wrong. In 2009 China implemented a policy which offered a roughly $442 incentive for buying fuel efficient car. Alas, their program did not achieve the anticipated results. My guess is because the rebate was passed on to the manufacturers directly, and not the buyers. Also, $442 being the relatively meager sum that it is—well, I also would not be surprised if Chinese consumers were willing to skip sticker price “savings” for the gas guzzler of their dreams, and manufacturers were happy to oblige.

We in the States have been there, done that. (cough *Hummer * cough). Anyhow, China isn’t giving up. Effective in January 2012 engine size will be taxed at graduated rates which top out at $821 for the largest engines and could be as low as $46 for 1.0-1.6 liter engines.

China may be onto a key aspect of consumer psychology here. If rebates on fuel efficient models won’t do the trick, perhaps slapping a heavier tax on the gas hogs will. They’re betting public distaste for higher taxes will be stronger than public enthusiasm for subsidies. I’m guessing they’re right .

For our part, the USA has its own “gas guzzler tax” which is also a graduated rate but is based on Miles Per Gallon (mpg) rather than engine size. Anything above 22.5 mpg is not taxed, while vehicles which get less than 12.5 mpg are tagged to the tune of $7,700.

Personally I like our mpg system better, as engine size is not the be-all-end-all of fuel efficiency, whereas the mpg metric is.

Source: autobloggreen