What Is the Gas Guzzler Tax?

What Is the Gas Guzzler Tax?

Let me explain the gas guzzler tax directly: it's a surcharge added to the sales or lease price of cars in the U.S. that fail to meet certain fuel economy standards. You should know that this tax is paid by the manufacturer or importer, and it ranges from $1,000 to $7,700 based on the vehicle's miles-per-gallon rating.

This tax targets passenger cars specifically, but it doesn't apply to trucks, SUVs, or minivans. That's because the law dates back to 1978, when those types of vehicles weren't commonly used for everyday passenger transport.

Congress introduced this through the Energy Tax Act of 1978, aiming to curb the production and buying of fuel-inefficient vehicles. If you're considering a new car, keep this in mind as it directly affects certain models.

How Does the Gas Guzzler Tax Work?

To avoid this tax, a car needs to achieve at least 22.5 miles per gallon in combined city and highway driving—fall short, and you're looking at the surcharge.

The tax amount depends on how inefficient the car is: just under 22.5 mpg means $1,000, but if it's below 12.5 mpg, it jumps to $7,700 at the high end. Manufacturers report this on IRS Form 6197 after the production year, once they know the total vehicles made.

When you're shopping, you'll spot the tax amount right on the window sticker if the car qualifies—it's that straightforward.

Which Cars Are Subject to the Gas Guzzler Tax?

The EPA used to publish lists of affected new car models up to 2016, and though they haven't updated it since, that list shows the pattern: mostly high-end luxury and sports cars from brands like Aston Martin, BMW, Ferrari, and Rolls-Royce.

You'll also find some American muscle cars on there, such as the Chevrolet Corvette and certain Ford Mustang versions. If you're into these, expect the tax to factor in.

How Fuel Efficiency Is Tested

If you want to check any U.S.-sold vehicle's fuel economy, look at the Fuel Economy Guide published by the government since 1984—it's available for every model year.

Manufacturers must use the EPA's test for both the tax and new car labels, but the calculations differ. For labels, an adjustment factor accounts for real-world driving versus lab conditions, known as in-use shortfall, based on additional tests.

However, for the tax, there's no such adjustment, so the mpg figure used is higher than what's on the guide or stickers. This means the tax threshold might seem easier to meet on paper than in practice.

Problems With the Gas Guzzler Tax

Back in 1978, when this tax was created, gas prices had surged 75% over six years, U.S. oil production was declining after peaking in 1970, and the 1973 OPEC embargo caused shortages and price spikes.

The tax was meant to push consumers toward fuel-conscious choices and manufacturers toward efficiency. But let's be clear: its impact has waned over time.

Vehicles That Are Exempt from the Gas Guzzler Tax

The SUV boom started with models like the 1984 Jeep Cherokee XJ, which didn't exist when the tax was passed, and over decades, SUVs became America's top vehicle choice.

In 2019, passenger car sales dropped 10.9% to 4.7 million units, while trucks, minivans, and SUVs rose 2.8% to 12.2 million. Manufacturers exploited exemptions for 'light-duty trucks' via EPA interpretations, creating a major loophole.

As a result, the U.S. collected less than $43 million from the tax in fiscal year 2019—far from its original intent to drive efficiency.