Topic: 'Feebate' program is flawed, more taxes needed

[Trainman]

Oh Joy, another study that recommends more taxes   



Federal auto 'feebate' program is flawed, study says
Last Updated: Thursday, November 22, 2007 | 2:35 PM ET
CBC News

The federal program offering cash grants to buyers of fuel-efficient cars is a first step to cutting fuel use but it has "several defects," according to a study by the C.D. Howe Institute.

In the study, policy analyst Robin Bannerjee supports the use of grants, but notes that the majority of vehicles attract neither grant nor tax.

"This reduces the effectiveness of the policy and reduces the impetus for manufacturers to make continuous improvements," he writes.

He's critical of Ottawa for failing to adequately consult the industry and for not phasing in the policy. He also notes that the program will hurt the market share of the Big Three North American automakers, which are disproportionately affected by the selective application of the policy.

The Conservative government unveiled the program, dubbed a "feebate," in its March budget. It gives grants of up to $2,000 to buyers of new cars that burn less than 6.5 litres of gasoline per 100 kilometres. It also imposes a tax of up to $4,000 on gas guzzlers that use more than 13 litres of fuel per 100 kilometres.

Bannerjee also says the plan won't do much to reduce greenhouse gas emissions. He cites another report by the Toronto-based think-tank that said the feebate will reduce Canadian greenhouse gas emission by, at most, one megatonne of carbon dioxide equivalent by 2010.
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"Clearly, the plan alone will make only a small contribution to achieving ambitious emissions reduction targets," he writes.

Bannerjee recommends that Ottawa maintain and even boost measures that encourage people to travel less — such things as increasing the basic fuel tax or bringing in a carbon tax.

"Such taxes would also provide an added incentive for drivers to switch to more fuel-efficient cars," he writes.

[dorin]

You know what, he's right.

If we're serious about reducing CO2 emissions then we need something with more teeth than the feebate and an across the board gas tax would do that.

[Jameel]

In general I do agree that if your mindset is to buy a certain vehicle a $1000 to $2000 rebate wont' make a huge dent in the decision.

But I found when my girlfriend recently leased a 2007 Mini Cooper we opted for the 6 speed manual instead of the automatic, because the feebate was only applicable to the manual.  So that did sway our decision a little bit.

But if I was in the market for a big V8 gas-guzzling SUV the $1000 would not make me go buy a yaris or mini.

[johngenx]

I think the only thing that will really make people change their buying habits is a big ol' giant gas tax.  In Canada, we're not nearly as bad for the monsterous SUV's that the US is.  They need a $2.00-3.00/gal surcharge, and they need it now.

[2latecrew]

Will a higher gas tax have an effect on how much some private citizens drive. Probbably.But at what cost?

Gas consumption in many areas is somewhat inelastic. Not everyone lives in downtown Toronto and can take the subway. With housing prices the way they are there has been a huge migration to rural areas and suburbs. There are many people who have to drive to get to work. Moving isn't an option. You'll drive their costs through the roof.
Those people on the lower income brackets/borderline of welfare/EI. It will hurt them.
Just think about the impact on the cost of goods due to increased transport costs. People will get hit twice. More of their income goes to gas and cost of goods also goes up?

I know it would hurt me personally. I have no choice but to drive for work and be paid mileage. Good luck trying to get a quick and equal adjustment made to mileage allowances.

I think that pushing the burden on drivers is the wrong way to go. Yes everyone needs to do a part but punishing someone because they have an older used car 9and can't afford to replace it) that doesn't get good mileage isn't the way to go. It really amounts to a regressive tax.

[safristi]

IF gas was a PENNY A LITRE...how much more could we drive......prolly a better solution seeing as we have a DINOSAUR LOAD of the STUFF and aren't seeing much of the benefits of an Energy Positive Nation...wheres CHAV_EH when we need HIM.....

[dorin]

I think that pushing the burden on drivers is the wrong way to go. Yes everyone needs to do a part but punishing someone because they have an older used car 9and can't afford to replace it) that doesn't get good mileage isn't the way to go. It really amounts to a regressive tax.

There are only two ways to reduce the gas consumption of our automotive fleet - compel drivers to choose the most miserly automobile they can get or compel manufacturers to only make miserly autos.  Which way do you propose?

[2latecrew]

I think that pushing the burden on drivers is the wrong way to go. Yes everyone needs to do a part but punishing someone because they have an older used car 9and can't afford to replace it) that doesn't get good mileage isn't the way to go. It really amounts to a regressive tax.

There are only two ways to reduce the gas consumption of our automotive fleet - compel drivers to choose the most miserly automobile they can get or compel manufacturers to only make miserly autos.  Which way do you propose?

Well you can't compel someone to buy a more fuel efficient vehicle if they can't a fford a new "fuel efficient vehicle"

However if you compel manufacturers to only make fuel efficient vehicles EVENTUALLY the only vehicles available for used purchase will be fuel efficient. It will take a long number of years but eventually vehicles wear out. eventually people who can afford it get new cars putting their old (but still more fuel efficient) vehicles into the used market.

as long as the most economical vehicles are not the most fuel efficient you'll have the same problem. It will probaly be compounded by lack of major development of fuel efficient technologies. How likley are people to choose say a used Prius in 8 plus years when the potential replacment of battery packs looms?

If you really want to use taxation to discourage consumption at least make it a progressive one. Force the people who have a choice to look at more fuel efficient vehicles. Slap massive gas guzzler taxes on SUVs which are clearly inefficient. If manufactures see large sales decines in this area but want to maintain this highly profitable segment they will find a way to come out with more fuel efficient vehicles in that segment. Rather than trying to get subcompacts to get 45 MPG rather than 40mpg how about having a,lot fewer 18 MPg SUVs sold. Get manufacturers to produce 25-30mpg SUV class vehicles.

I see this as the easiest target. its the most "unessesary and conspicous consumption. You don't have to put these taxes equally on trucks (without rear passanger room that are necessary for work. How many people NEED an SUV really as a % of those who drive them becuase they look cool?

[tpl]

I think that pushing the burden on drivers is the wrong way to go. Yes everyone needs to do a part but punishing someone because they have an older used car 9and can't afford to replace it) that doesn't get good mileage isn't the way to go. It really amounts to a regressive tax.

There are only two ways to reduce the gas consumption of our automotive fleet - compel drivers to choose the most miserly automobile they can get or compel manufacturers to only make miserly autos.  Which way do you propose?

The first choice is not compulsion exactly, it is appealing strongly to the drivers self interest and it would be interesting to see who wins. I'd place my bets on the advertising industry.  After all, in the EU countries with extremely high gas prices people still exercise their choice of buying the vehicle they want however inefficient.
 I would be against the second as that just leads inexorably to the state car company making Trabants for the proletariat... while the higher purpose people get driven around in  Mercedes limos. Just like big chunks of the 3rd world and the way that the communist countries used to work.

[safristi]

  COMPELLING Arguments....!!!...?

[Jameel]

Well you can't compel someone to buy a more fuel efficient vehicle if they can't a fford a new "fuel efficient vehicle"

However if you compel manufacturers to only make fuel efficient vehicles EVENTUALLY the only vehicles available for used purchase will be fuel efficient. It will take a long number of years but eventually vehicles wear out. eventually people who can afford it get new cars putting their old (but still more fuel efficient) vehicles into the used market.

as long as the most economical vehicles are not the most fuel efficient you'll have the same problem. It will probaly be compounded by lack of major development of fuel efficient technologies. How likley are people to choose say a used Prius in 8 plus years when the potential replacment of battery packs looms?

If you really want to use taxation to discourage consumption at least make it a progressive one. Force the people who have a choice to look at more fuel efficient vehicles. Slap massive gas guzzler taxes on SUVs which are clearly inefficient. If manufactures see large sales decines in this area but want to maintain this highly profitable segment they will find a way to come out with more fuel efficient vehicles in that segment. Rather than trying to get subcompacts to get 45 MPG rather than 40mpg how about having a,lot fewer 18 MPg SUVs sold. Get manufacturers to produce 25-30mpg SUV class vehicles.

I see this as the easiest target. its the most "unessesary and conspicous consumption. You don't have to put these taxes equally on trucks (without rear passanger room that are necessary for work. How many people NEED an SUV really as a % of those who drive them becuase they look cool?

I totally agree with you 2latecrew higher taxation on gas will hurt the lower class.

People who can afford an SUV or a gas guzzler should be taxed a lot higher.

[tpl]

"People who can afford an SUV or a gas guzzler should be taxed a lot higher."

So do you want a higher top income tax rate or progressive sales taxes?    The latter is difficult to do administratively and just yesterday the Finance minister was saying that the high end of our income tax system is too high. He was comparing it to other countries...probably the USA... and saying that was politically difficult to do... unfortunately.


 Some economists would say that Canada should have somewhat more of the tax revenues derived from consumption taxes that it does... and some would say its about right.    For myself, as a layman ( economics wise) I just do not understand this insistence on taking more money from people that is already taken.  This country needs no more taxes... I will concede that the Provinces. who have more liabilities than were ever expected in 1867 need a bigger share of the money... so that they in turn may assist cities but that is it.

[Jameel]

"People who can afford an SUV or a gas guzzler should be taxed a lot higher."

So do you want a higher top income tax rate or progressive sales taxes?    The latter is difficult to do administratively and just yesterday the Finance minister was saying that the high end of our income tax system is too high. He was comparing it to other countries...probably the USA... and saying that was politically difficult to do... unfortunately.


 Some economists would say that Canada should have somewhat more of the tax revenues derived from consumption taxes that it does... and some would say its about right.    For myself, as a layman ( economics wise) I just do not understand this insistence on taking more money from people that is already taken.  This country needs no more taxes... I will concede that the Provinces. who have more liabilities than were ever expected in 1867 need a bigger share of the money... so that they in turn may assist cities but that is it.

Agreed, Canadians are way over taxed.  Luckily the government is giving back a little bit of  the +$14Billion surplus.  Not enough but better than nothing.

Taxing a commodity like gas will increase prices for everybody and will really hurt lower income families that's not fair.  But if you can afford an Escalade or $100K Range Rover or Porsche Cayenne Turbo you should be slapped with a tax guzzling tax.

[airbalancer]

But if you can afford an Escalade or $100K Range Rover or Porsche Cayenne Turbo you should be slapped with a tax guzzling tax.

so anyone that has a house over 1000 sq ft or cottage or a tv of  10 inches should be tax more

[tpl]

"Taxing a commodity like gas will increase prices for everybody and will really hurt lower income families that's not fair.  But if you can afford an Escalade or $100K Range Rover or Porsche Cayenne Turbo you should be slapped with a tax guzzling tax."


2007 Escalade fuel economy from the 2007 book 16/26 mpg
Trouble is.   You then have three choices.
1) a one time sales tax.  has to be enormous to make a difference  I suggested one on the forum some time ago     $500*2^(22-true city mpg)   which would be rebated to REAL business users against their corporation taxes.    Probably an Escalade would attract another $32000.  That should do it.
2) a yearly tax on the license sticker.  $1000 for an Escalade? or more?

3) Or put the price of gas up by how much?  I'd start by saying to the public that there would be a schedule over a few years   50c/l year 1 and then 25c/l for each of the next 4 years. That gives the mfrs and the people time to make plans.   I would exempt Diesel form the first 50c to give buses and big trucks a chance as their replacement time is longer than cars.   So that would get gas to $2.50 litre  after 4 years

Then REDUCE ALL the rates of income tax by 20-33% and increase the tax free allowance to maybe $15-20k.   Yep the top rates as well.

I wouldn't do any of these things... I'd just leave it alone and let people buy what they wish

[safristi]

..This is TAXING ma BRAIN.......Flat Tax ...  Fat Tax....Fast TAX... Vat tax..Vot tax ?.. let's call the WHOLE THING OFF......what exactly (YUP EXCACTLY!!!) are we getting for our TAX DOLLARS......oh to be a Fly on the WALL at Rev Can and Cabinet meetings....

[2latecrew]

"People who can afford an SUV or a gas guzzler should be taxed a lot higher."

So do you want a higher top income tax rate or progressive sales taxes?    The latter is difficult to do administratively and just yesterday the Finance minister was saying that the high end of our income tax system is too high. He was comparing it to other countries...probably the USA... and saying that was politically difficult to do... unfortunately.


 Some economists would say that Canada should have somewhat more of the tax revenues derived from consumption taxes that it does... and some would say its about right.    For myself, as a layman ( economics wise) I just do not understand this insistence on taking more money from people that is already taken.  This country needs no more taxes... I will concede that the Provinces. who have more liabilities than were ever expected in 1867 need a bigger share of the money... so that they in turn may assist cities but that is it.

I'm not advocating taxing PEOPLE who can afford an Escalade more. That doesn't directly effect the problem. Tax heavily VEHICLES that 1. Have poor consumption 2. Consume unesssisarily.

Let me discuss this. If you need a large truck to haul rocks or trailers full of goods for business its more necessary consumption. Yes you can try to pick the most efficient vehicle to do the job but you simply can't safely do these things without a big powerful (and less efficient) vehicle. Those people buying escalades ..what % of them are using them to go offroad? What % actually haul a number of people around that requires a vehicle this big? Are there more efficient vehicles that can regularly haul 6 or 8 people? I would suppose there are a few people who get unfairly penalized because they truly need an Escalade but the % is tiny compared to taxng everyone.

Taxing new purchases has the additional advantage of allowing people to make their choice. If you know there is a huge tax on SUVs but still choose to buy it so be it. If you tax all gas more you are in effect punishing people for a choice they made BEFORE you changed the rules. I really hate when I get dinged because someone changes the rules on me after I've made my decision. I don't think its right that someone choose an Xvehicle that gets a few MPG less but cost $5000 less and now you jack the gas tax way up to the point where they would have saved more money by spending the extra 5k for the more fuel efficient vehicle.

This isn't like the home energy program where the government gives substantial grants to upgrade your windows for example. No one is going to give you a grant to sell your current car an upgrade to more fuel efficient car. At least not close to the grant needed to offset the huge depreciation hit you take.

[Cord]

I hate it when people suggest using taxes as a force of social engineering.  If there's no concern about the few people that will be taxed unfairly and if the goal is to eradicate the offensive item anyway, why not just advocate a complete ban on the offending item and be done with it?

[Jameel]

I hate it when people suggest using taxes as a force of social engineering.  If there's no concern about the few people that will be taxed unfairly and if the goal is to eradicate the offensive item anyway, why not just advocate a complete ban on the offending item and be done with it?

AGREED, let's get rid of all SUVs.

[tpl]

"I'm not advocating taxing PEOPLE who can afford an Escalade more. That doesn't directly effect the problem. Tax heavily VEHICLES that 1. Have poor consumption 2. Consume unnecessarily."

And who pays the tax? Vehicles don't pay tax, people pay  tax. 


Anyway my plan for taxing inefficient vehicles would make no difference to anything.  People would still buy them.