Sunday, August 31, 2008

The Road Block to Fuel Efficiency

Many states, like Georgia, California and Nevada, have annual vehicle taxes or registration charges that are based on a vehicle's assumed market value. This tax, called an "ad valorem tax," provides for a maximized tax level in the first year that a car is taken off the showroom floor. Then, over a period of five, seven or ten years, that tax is reduced on step-basis until some standard or minimum tax level is eventually achieved. This is a class-based tax on the assumption that it targets the "rich" who can afford a new or newer car. It favors the poor of the community who have and hold older cars. It certainly acts as an incentive for someone to keep an older car as long as they can keep it running.

In Barack Obama's acceptance speech of Thursday, he mentioned his goal of getting off Middle East oil in 10 years. Of course, he didn't specifically say how that would be done. He did, however, mention that his plan would include assisting people in buying newer and more efficient cars. I suppose he would do this with some kind of Federal tax deduction as a incentive for buying a new car.

To me, this is another case of the "left" hand not understanding or knowing what the other hand his doing. Because of the prevalence of "ad valorem taxes" in America, mostly in Democratic, tax-it-if-moves legislatures, the ad valorem tax will always act as a deterrence to anyone wanting to buy a new or newer car. That's because the Federal tax deduction, the one that Mr. Obama will probably propose, will only apply in the first year. From then on and until the minimum tax level is achieved, the owner of the car will continue to pay the higher tax for his newer car. Therefore, only the higher income peoples of our society will be able to afford both the new car and afford the tax burden that goes with it. Mr. Obama doesn't know it but, in essence, he had just promised a tax cut for the rich. The rich who can afford new cars and will gladly take that tax deduction against the new and higher taxes that Mr. Obama plans to impose on them.

It is really easy for a national politician to make speeches that sound so rosy. However, the implementation is something entirely different. I guess the "hope" that Mr. Obama is always talking about is the "hope" that you, the voter, can't figure out that he can't really achieve what he is saying. Right, Mr. Obama!

One final note. Barack Obama seems to think that the Middle East is the only source of oil that we should worry about. This just shows how clueless he is. Russia is a big oil producer in the world. Oil is helping to fuel their new military growth. Because both Western and Eastern Europe are so dependent on Russian oil, don't expect any effective or real or substantial actions to be taken against Russia by either NATO or in the United Nations. Also, more closely to home, Venezuela is another oil producer that is flush with cash from the current high oil prices and is heavily buying military equipment from Russia. We should be seriously concerned about any future moves Venezuela can take against its neighbors in South America and, ultimately, against us. Also, the oil markets in the world work like a big commingled bucket that gets dipped into by most non-old and some oil producing countries in the world. While we don't trade with a country like Iran, it is more than likely that we are, today, getting Iranian oil into are ports. A staff writer from the Obama-friendly Associated Press clearly outlined how unlikely Mr. Obama's promise of Middle East oil dependence would be (See Full Story).

Image by Danilo Prates' on Flickr with Creative Commons Licensing. All rights retained. (Click to View Other Works).

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