Obama Unveils New Auto Tax

You hear that great big sucking sound? That's the tax that the Obama Administration is putting on every single vehicle that will come off declining production lines in the US as a result of his plan to increase CAFE standards and cut emissions.

The amount of this tax? $1,300 when the standards are fully implemented after President Obama is gone from office in 2016.

The new requirement is estimated to cost consumers an extra $1,300 per vehicle, but drivers will be saving at the pump. Moreover, the increased miles per gallon should save 1.8 billion barrels of oil through 2016 and cut greenhouse gas emissions by more than 900 million tons, the equivalent to shutting down 194 coal plants, a senior administration official said Monday.

It also marks the first time federal vehicle standards require cuts in carbon dioxide and other greenhouse gases tied to global warming.

While the 30 percent increase translates to a 35.5 mpg average for both cars and light trucks, the percentage increase in cars would be greater, rising from the current 27.5 mpg standard to 39 mpg starting in 2016. The average for light trucks would rise from 24 mpg to 30 mpg.

Cutting emissions should be lauded as should increased fuel economy standards, but the unintended costs always seem to cause more problems than they solve. The initial implementation of CAFE standards brought about econoboxes that no one wanted and ushered in the era of the SUV since people wanted larger vehicles to carry their stuff. Small cars are not conducive to carrying kids either, and one needs an SUV to carry around all the stuff that kids need these days, whether its car seats, strollers, or groceries in addition to the kids.

US automakers made tremendous profits off those SUVs and minivans, but they also had to build economy cars to meet their CAFE requirements. When the price of gas rose, the US automakers lost billions as people stopped buying SUVs and turned to foreign automakers who made what was perceived to be better small cars than the US automakers.

Pushing hybrid vehicles at the expense of other cars doesn't necessarily make sense. Replacing a conventionally powered SUV with a hybrid may make sense, but switching from a small car to a hybrid doesn't. Consider that the 2009 Toyota Corolla XLE gets 30mpg mixed driving and costs $17,650. Annual fuel costs are $840.00 ($2.10 per gallon)

The 2009 Toyota Prius base gets 46mpg and costs $23,375. Annual fuel costs for 12,000 miles: 547.83 ($2.10 per gallon)

You save only $292.17 per year by going with the Prius over the Corolla. Given the cost differential, it would take 19 years to get back the price differential of $5,725.

The number of years it takes to make up the initial investment in the hybrid gets shorter the higher the gas prices go.

Trading in a midsize sedan for a hybrid isn't going to be worth it to most car buyers. It's only worth it when you trade in a gas guzzler for a hybrid.

The issue is that it doesn't make sense for most people to go to a hybrid like the Prius when people want larger cars. Switching from a standard SUV to a Hybrid SUV does make sense, since the gas savings will be considerable.