Energy Tax Act

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.

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 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 applies to passenger cars. Trucks, sport utility vehicles (SUV), and minivans are not covered because these vehicle types were not widely available in 1978 and were rarely used for non-commercial purposes. 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.

Energy tax

An energy tax is a tax that increases the price of energy (Fisher et al., 1996, p. 416). Arguments in favour of energy taxes have included the pursuit of macroeconomic objectives, e.g., fiscal deficit reduction in the 1990s, as well as environmental benefits, i.e., reduced pollution (Nellor, 1994, p. 1). A weakness of energy taxes is that they impose a burden (or cost) in the form of reduced economic output and employment (p. 19).

United States

In 1993, then President Bill Clinton proposed a BTU tax. A BTU tax is a type of energy tax (Baron, 1997, p. 14). The tax would have taxed all fuel sources based on their heat content except for wind, solar, and geothermal. It was never adopted. The BTU tax passed the House, but was rejected by the Senate in light of the lobbying effort mobilized against its adoption. The rejected proposal was watered down, as the Clinton administration tried to salvage their efforts by offering to exempt manufacturers and base the tax on the cost rather than the heat content of energy. Many of the House Democrats who voted for the tax and who lost their seats in the 1994 midterm election, blamed their loss on their vote for the BTU tax. Getting "BTU'd" became Beltway slang at the time for those who lost reelection by voting for the controversial proposal.