CAFE Standards: The Unintended Consequences


Detroit News - May 3, 2012

It’s always the unin­tend­ed con­se­quences that get you! As an illus­tra­tion of this piece of wis­dom, the Fed­er­al Gov­ern­ment has real­ized that new CAFE stan­dards will have the effect of dras­ti­cal­ly low­er­ing the amount of mon­ey col­lect­ed by the U.S. Trea­sury from the gaso­line tax. They esti­mate that increas­ing fuel effi­cien­cy of cars and trucks on Amer­i­can roads will result in $57 bil­lion less in tax­es col­lect­ed through 2015.

Last sum­mer the Admin­is­tra­tion pro­posed rais­ing fuel effi­cien­cy stan­dards to 54.5 mpg by 2025. Automak­ers signed on to these new CAFE stan­dards and will need to offer con­sumers addi­tion­al elec­tric vehi­cles, hybrids and oth­er tech­nolo­gies to meet these stan­dards. As Glo­ria Bergquist from the Alliance of Auto­mo­bile Man­u­fac­tur­ers points out, “There are always pol­i­cy trade-offs for CAFE stan­dards.”

Cur­rent­ly the Trea­sury col­lects an excise tax of 18.4 cents on every gal­lon of gas sold to con­sumers at the pump and 24.4 cents for diesel fuel. In addi­tion most states col­lect a gas tax with Cal­i­for­nia the high­est at 7.25%. The tax rev­enue col­lect­ed by the U.S. Trea­sury goes into the High­way Trust Fund which is then spent by Con­gress by way of a bi-annu­al Trans­porta­tion Appro­pri­a­tion Bill.

Esti­mates are that the gas tax would need to be increased by 5 cents per gal­lon to make up for the short­fall.



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