[Congressional Record (Bound Edition), Volume 152 (2006), Part 8]
[Extensions of Remarks]
[Pages 10747-10748]
[From the U.S. Government Publishing Office, www.gpo.gov]




   INTRODUCTION OF ``NO SPECIAL TAX SUBSIDIES FOR GAS GUZZLERS ACT''

                                 ______
                                 

                         HON. EDWARD J. MARKEY

                            of massachusetts

                    in the house of representatives

                          Friday, June 9, 2006

  Mr. MARKEY. Mr. Speaker, today I am joined by Reps. Anna Eshoo, Raul 
Grijalva, Barbara Lee, Pete Stark, Jim Oberstar, Bernie Sanders, Sam 
Farr, Lois Capps, Jim McGovern, Betty McCollum, Bill Delahunt, Jay 
Inslee, John Olver and Jim Moran in introducing a bill entitled, ``No 
Special Tax Subsidies for Gas Guzzlers Act.'' With our budget deficit 
running at near record levels the federal tax incentives, it seems odd 
that we would find it fiscally responsible to provide incentives to 
purchase automobiles which are especially inefficient. In fact, this 
runs directly contrary to other public policy initiatives, such as the 
fuel economy standards and the gas guzzler tax, which were adopted to 
try to keep the fleet of cars on the road from using more gasoline than 
is necessary. Now that we have troops in the Middle East, these odd, 
counter-productive incentives can also be viewed as directly 
undermining our need to break the national addiction to imported oil.
  This legislation corrects two incentives which are out-of-step with 
the times--the SUV Tax Loophole and the Gas Guzzler Tax loophole.
  Some estimate suggest that if we reform either of these perverse 
incentives so that SUVs receive the same tax treatment as they would if 
they were classified as passenger vehicles, the savings would be at 
least $1 billion over 10 years.
  The federal tax code affects the purchase of heavy-duty SUVs through 
preferential tax treatment of depreciation for motor vehicles and 
passenger cars. Recently, the Congressional Research Service reviewed 
this situation and concluded that for a hypothetical purchase made in 
2005, a businessman would realize a much higher after tax return on 
investment by purchasing an SUV instead of a similarly priced passenger 
car--$3,000 higher in the example given. ``In this treatment lies the 
most important tax subsidy for the purchase of these SUVs for business 
use.'' (``Tax Preferences for Sport Utility Vehicles,'' Guenther, Gary, 
Congressional Research Service, (RL32173), April 4, 2006, p. 5.) The 
report notes that ``there is no question that current depreciation 
rules favor the purchase of heavy-duty SUVs over lighter SUVs or 
passenger cars of comparable value. Supporting evidence can be found in 
the greater tax benefit to business taxpayers from buying an SUV exempt 
from the depreciation caps on luxury passenger cars than from buying a 
vehicle subject to those caps. This added benefit stems from the 
accelerated depreciation for heavy-duty SUVs available under IRC 
section 179.'' Ibid, p. 11.
  The Report goes on to note that when Congress moved in 2004 to reduce 
the expensing allowance for SUVs from $100,000 to $25,000, it may have 
thought it was significantly reducing the tax tilt to SUVs, but in fact 
``it did little to curtail the tax preference for buying these vehicles 
under current depreciation rules.'' Ibid, p. 13.
  The legislation we are introducing today will eliminate the tax tilt 
so that a businessman is not led to buy the heavier vehicle by virtue 
of a perverse tax incentive. There may be other reasons to buy the 
larger vehicle, but a tax preference should not be one of them.
  Cars which consume excessive quantities of gas are subject to a `gas 
guzzler' tax which is intended to encourage automakers to produce and 
develop more fuel efficient vehicles. This tax has been highly 
effective. During the model year (MY) 2003, fewer than 100,000 (or 
1.3%) of cars purchased were gas guzzlers. However, the tax is only 
subject to passenger vehicles, which means that SUV's escape the gas 
guzzler tax entirely!
  This bill would incorporate SUV's into the gas guzzler tax schedule 
that applies to other passenger vehicles.
  The gas guzzler tax originated with the Energy Tax Act of 1978 (P.L. 
95-618), and the IRS issued the first regulations to implement it in 
1980. It applies to domestic sales of automobiles by manufacturers and 
importers, who are required to pay the tax. IRC section 4064(b) defines 
an automobile as any ``four-

[[Page 10748]]

wheeled vehicle propelled by fuel which is manufactured primarily for 
use on public streets, roads, and highways.'' Until the passage of the 
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 
Legacy for Users (SAFETEA-LU, P.L. 109-59) in August 2005, the 
definition of automobiles also stipulated that such vehicles have an 
unloaded gross vehicle weight of 6,000 pounds or less; the act repealed 
this weight limitation, subjecting all vehicles meeting the remaining 
criteria for an automobile to the tax, irrespective of their weight. 
Certain vehicles are exempt from the tax: namely, emergency vehicles 
such as ambulances and police cars, cars with a gas mileage rating of 
22.5 miles per gallon (mpg) and over, and all ``light trucks'' 
including SUVs of all weights. Whether a gas guzzler tax is owed--and 
if so, the amount of the tax--depends on an automobile's combined city 
and highway fuel economy rating, which is defined as the average number 
of miles traveled by an automobile per gallon of gasoline as determined 
by the Environmental Protection Agency. The current tax ranges from 
$1,000 for cars with a fuel economy rating of at least 21.5 miles per 
gallon but less than 22.5 miles per gallon to $7,700 for cars with a 
rating of less than 12.5 miles per gallon. These amounts have been in 
effect since the enactment of the Omnibus Budget Reconciliation Act of 
1990 (P.L. 101-508). In FY2004, the tax raised $141 million in revenue, 
up from $71 million in FY2000.
  Again, the Congressional Research Service analyzed the SUV exemption 
from the gas guzzler tax, noting that by exempting SUVs, demand for 
heavy-duty SUVs is likely to be greater than it would be if they were 
subject to the tax and buyers were forced to bear its burden. Since 
most heavy-duty SUVs get relatively low gas mileage, retail prices 
could be as much as $4,500 to $7,700 higher for many models if current 
law were changed to subject them to the tax and importers, 
manufacturers, and dealers were to pass the full amount of the tax on 
to buyers.
  In applying the gas guzzler tax to SUVs, the legislation makes 
certain exceptions for vehicles clearly intended for carrying heavy 
loads, pick up trucks with open beds, and so forth.
  For years we have stood idly by while watching our energy dependence 
soar as consumers responded to these perverse loopholes and upside-down 
tax incentives. The health of our environment and the safety of those 
purchasing small vehicles is affected adversely by giving preferences 
to inefficient SUVs. While we complain that China is now affecting 
demand for world oil, we continue to tolerate a tax code which 
artificially skews in favor of the purchase of the least efficient 
vehicles.
  We no longer have the luxury of ignoring this ridiculous situation. 
Please join us in supporting efforts to reform this self-inflicted 
source of wasted gasoline and oil.

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