Bill Would Tax Cars Based on Fuel Economy

A Washington state legislator has proposed adding an annual fuel economy tax to all vehicles. The fee plan, according to Edmunds.com's Green Car Advisor, would start with $40 for the highest fuel economy cars and up to $240 for the least efficient cars.

Washington like many other states is dealing with a revenue shortfall because people are buying less gas, which is depleting revenue from the fuel tax.

This tax on all vehicles will be wildly unpopular with citizens and is unlikely to pass. It puts a burden on all drivers but does not consider how much they drive, which at least is included in the gas tax. Raising the gas tax is the most straightforward approach (we pay a fraction of the gas tax in Europe), or the state could increase toll road charges. Another option would be to increase the sales tax on new vehicles so to be relative to price and fuel economy.

Washington also needs to consider the other effects of the higher gas tax. Are more people taking public transportation, and are those revenues rising? Perhaps a luxury tax on limousine services that generally use fuel-inefficient vehicles could make up some of the deficit.