Some hybrid Mazdas are now subject to the luxury car tax but the RAM 3500 still isn’t? This is wrong and bad and the federal government should feel absolutely ashamed of itself.
The government has tightened the rules around the luxury car tax. Efficient vehicles always got a little exemption.
The luxury car tax kicks in for cars over $76,950 but for fuel efficient cars it kicks in at a price of $89,332. What they’ve done is change the rules about what counts as fuel efficient. Now a car needs to get less than 3.5 litres per 100km. It used to be 7 litres per 100km.
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So a car that costs $80,000 and gets 4 litres per 100km will be, as of the middle of next year, subject to luxury car tax. Now it’s not a huge tax, but it’s the principle of the thing. Because as the next table shows, some much worse cars are getting off scot-free.
Example Car | Car price | L / 100 km | Old tax | New tax |
Hybrid | $75,000 | 5 | $0 | $0 |
Hybrid | $80,000 | 5 | $0 | $1000 |
Hybrid | $85,000 | 5 | $0 | $2657 |
Hybrid | $90,000 | 5 | $222 | $4307 |
Big Diesel Ute | $110,000 | 12 | $0 | $0 |
I get we need tighter fuel efficiency standards. That is fine. What’s not fine? The fact some of the most enormous fuel-guzzling cars in Australia are exempt from luxury car tax. Drive a polite hybrid like the Mazda CX-60? Get whacked with a tax! Drive a giant American monster truck? Tax break for you!
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Commercial vehicles are exempt from the luxury car tax. Which is why the Woolworths car park and school drop-off are absolutely chock-a-block with enormous “trucks”. Ranger or HiLux? They are bigger than ever and more popular than ever. But they’re not the biggest utes any more. No way.
RAMs, Chevrolet Silverados and Toyota Tundras are so big they are making a Ford Ranger look like a sensible compromise.
And sales of those model are going berserk, as the next chart shows.
Taxing fuel efficient modestly size vehicles, while exempting huge awful ones, is one of the most upside down and back-to-front decisions I’ve ever heard. And it will make Australia a worse place for all of us and all of our kids.
Why are big utes bad?
1. The killing.
Pedestrians get turned into strawberry jam. Kids on bikes too. Your mum in her Toyota Corolla? The RAM front bumper is right at her head height as she drives and the force of the half-tonne utility obliterates the A-pillar of her 1,500 kilogram hatchback. High Bonnet height, poor stopping distance and large mass make impacts worse. Does your mum’s car have side airbags? If the RAM is going fast enough it doesn’t matter.
2. The visibility.
The RAM driver can see for miles. Everyone behind the RAM can only see its exhaust pipe.
3. The parking.
They don’t fit.
4. The arms race.
An arms race is a situation where everyone spends a lot of resources and only makes themselves less safe. Like the US and Russia both spending billions making thousands of nuclear warheads. An arms race is an example of a paradox: individually perfectly rational but collectively? Insane.
Big cars are an arms race. Did you know those ANCAP ratings only judge cars against cars in their own category? A 5-star rating for a Corolla does not mean you’re safe in one if a ute hits it. If you want your kids to be safe from RAMs you need to buy them a RAM.
See how it’s a system with a tipping point? We are currently on the wrong side of the tipping point. We need to pull back.
All of these are about a negative effect a big ute has on other people. Big utes are useful to their owners! They are lovely to have. For their owners.
However lots of things are lovely to have and we still regulate or tax them because they are annoying or unsafe for other people.
This is one of the important insights of economics. If something is good for the owner but bad for everyone else you get too much of it. Like a factory belching out dangerous pollution: great for the factory owner, bad for everyone else. We call it a negative externality.
All cars have negative externalities, but the negative externalities of a RAM are way bigger than the externalities of a classic Falcon ute (which, by the way, could fit longer pieces of timber than the RAM 1500’s 5-foot-7-inch tray. And you simply reached into the Falcon’s convenient tray, no need to unfold a cute little stepladder).
The following charts show the situation on our roads. Road deaths were falling; they’re not any more. This is despite a lot of technology.
My car beeps at me and brakes by itself and does a lot of useful stuff cars weren’t doing in the past. And all that tech was helping for ages. But then we turned a corner, gave up on sedans, and started buying bigger and bigger vehicles.
Now the deaths are rising again, despite the improved technology. A major suspect is the rising size of cars on our roads. Taxing big vehicles would solve that more quickly than taxing hybrids.
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