While it won’t be enough to get the measure through the Senate, it’s good to see the Greens negotiate a reasonable agreement with the federal government regarding the planned tax increase on higher priced cars. (UPDATE 4/9 – The legislation was voted down in the Senate this morning without any opporutnity for amendments to be moved, when the Family First Senator voted with the Coalition).
Under the Greens’ agreement, cars under $75 000 which are considered fuel-efficient (defined as using less than seven litres of petrol per 100 kilometres) would have been exempt from the tax hike, which kicks in for all other cars at $57 000.
This seems like a good idea to me. However, I do have to say the hyperbole alarm went off reading this comment from Green Senator Christine Milne:
“This is the first time I have known of where a Government has actually been prepared to look at a tax as anything other than revenue raising and actually drive a behavioural outcome, particularly in relation to the environment”
This seems rather overstated, to put it mildly, given the long-standing practice of using tax to drive behavioural changes on alcohol and cigarettes. In the environmental area, there have been examples of sales tax exemptions and the like over many years justified on environmental grounds. I can recall the Democrats negotiating a sales tax exemption on recycled paper which lasted for while in the early 1990s, to give just one example. There have been tax and excise exemptions in the area of ethanol and alternative fuels at various times, some of which still exist at present, which have been justified at least in part on environmental grounds.
I’m not convinced every one of those exemptions have actually been environmentally beneficial, particularly when it comes to at least some parts of the biofuels area. But that doesn’t mean they’re a bad idea, just that all the possible knock on consequences of the market adapting to the use of a particular criterion to give a tax exemption need to be closely considered.
However, this latest exemption would have been unlikely to cause any unintended harm. It may well have not made that much positive impact either, but getting acceptance of the principle of using price signals to encourage more fuel efficient cars is a worthwhile thing in its own right. The price signal of being able to drive your car more cheaply if it a fuel efficient one is a more economic efficient one than tinkering with tax exemptions, but presumably such factors matter less to people who are prepared to pay $60 000 or so for a new car.