What To Do When Green Tax Breaks Are Too Effective?

Tom Raftery/CC BY-SA 2.0

From specifically taxing gas guzzlers more to tax breaks for hybrids and other fuel efficient vehicles, the idea of using the tax code to influence our choice of vehicle—and encourage the purchase of technologies that have less of a negative impact on our collective well-being—is hardly new. In fact, the astounding success of the Toyota Prius is due in no small part to the favorable grants, tax credits and incentives that have been enacted by governments around the world.

But some say there is a problem with such green taxes, because if they do what they are supposed to do—namely shift consumption patterns to more responsible options—then there is a danger that they undermine their own existence by reducing Government revenue in the long run.

That appears to be what is happening in the UK, where the Telegraph reports that Government ministers are considering scrapping or severely curtailing tax incentives for electric cars and fuel efficient vehicles because they have proved too popular:

The talks come as ministers try to prevent a fall in tax revenues as more motorists choose smaller, cleaner cars that incur a lower rate of duty. Labour has accused the Coalition of planning a “stealth tax” on drivers, effectively punishing them for going green.

Ministers say that while they have not finalised their plans, changes may be necessary to ensure the “sustainability of the public finances”.

Of course, the sustainability of government finances is an important consideration, assuming you thing government is worth preserving. But rather than back tracking on measures because they do what they say they were supposed to do, why not double down on what is an effective policy? Instead of canceling tax breaks on fuel efficient vehicles or clean energy, it's time to continue the shift in taxation away from things we need (like jobs) and toward the things we don't (like pollution).

You may say I'm a dreamer...

Tags: Activism | Economics | Electric Cars | Electric Vehicles | Fuel Efficiency | United Kingdom

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