A think tank in the United Kingdom is advocating for a tax on SUVs. The proposal calls for a £10 ($13.40) per kilogram for every car weighing over 1,600kg (3,527 lbs.), with an additional 400kg allowance for battery-powered vehicles. The proponents argue that will help ease the nation’s budget deficit by raising £1.7 billion in tax revenue, while simultaneously reducing environmental pollution, increasing public safety, and reducing damage to roads caused by heavy cars. According to the group, SUVs currently account for 60 percent of new vehicle registrations. Supporters of the tax emphasize the danger larger vehicles pose to cyclists and pedestrians and the additional congestion they cause on roads and in parking lots.

If implemented, the new tax would put the UK in line with some of its neighboring countries in Europe. In France, SUVs are taxed 20 times the amount as in the UK, in some cases nearly doubling the cost of the vehicle to consumers. Although seven EU countries have no tax on SUVs, approximately half of the countries in the European Union have taxes on SUVs that are more than three times as much as in the UK.

Discussion Questions:

  1. Many countries in Europe have extra taxes on large vehicles, as well as gasoline taxes over $1.50 per gallon. If similar taxes were levied in the US, how would you expect Americans’ driving habits to change?
  2. Use a supply and demand graph to show the deadweight loss created by too many people driving large vehicles.