The law of unintended consequences strikes again in Canada
We've all experienced the law of unintended consequences, and it has just struck again in Canada. Years ago a provision was put in US tax law that allowed businesses to deduct $25,000 for the purchase of trucks used for commercial reasons. Unfortunately this meant that many small and medium business owners ended up buying big SUVs for the business that ended being used for personal use.
Earlier this year the Canadian government introduced an array of new taxes and rebates that were intended to promote sales of more efficient vehicles. As usual the politicians left a loophole big enough to drive a pickup truck through. In a move probably targeted at business users, the Canadian rules exempted pickup trucks from the new gas-guzzler taxes. The obvious result was that in a reverse of a several year trend pickup truck sales have jumped by eighteen percent since the new taxes went into effect while SUV sales have dropped by a similar amount. With four door crew cab pickups being widely available now, such trucks pose less of a penalty in utility compared to standard models.
[Source: PickupTruck.com, thanks to Mike for the tip]
Reader Comments (Page 1 of 1)
Phil L. 9:07AM (8/20/2007)
Yet another confirmation of my inherent distrust of government's ability to effect consistent, predictable change.
With a problem this complex, it's probably too much to expect a political entity to be decisive, particularly if that decisiveness will result in pain for constituents.
I'm sure some bureaucrat came up with spiffy PowerPoint slides that showed precisely how this legislation would affect driver/buyer habits and create a desired outcome. But once again, the consumer ignored the pie chart, and did what made sense to them for their own situation at that moment.
Can we really learn the hard lessons?
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Arnie 9:51AM (8/20/2007)
There's no problem that taxes can't fix! Hahaha
Liberals.
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Hamster 10:33AM (8/20/2007)
Arnie,
Canada is run by Conservatives like their American neighbours. When they were run by Liberals they didn't have this tax law.
Previous Quebec's PM message on the Bush influence in Quebec
http://www.youtube.com/watch?v=vttnF8AvmlA
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Hamster 10:34AM (8/20/2007)
Canada is run by Conservatives not liberals.
Video on the Conservative influence.
http://www.youtube.com/watch?v=vttnF8AvmlA
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Tim 11:00AM (8/20/2007)
Who wants Gov't to run health care?
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rgseidl 12:43PM (8/20/2007)
Just tax fuels appropriately and no-one will buy a fuel-guzzling pick-up truck just for the heck of it. If you really need such vehicles to run your business, fine, your prices will include the total cost of ownership of your fleet. Competition will then quickly weed out those who overspend.
To compensate for the higher fuel taxes, make commensurate cuts in income and/or general sales taxes. Above all, make this lateral shift gradual (e.g. over 10 years), predictable and irreversible. People do respond by purchasing more fuel-efficient vehicles, just look at Europe and Japan. It just takes longer than impatient politicians would like.
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Ron Fischer 4:26PM (8/20/2007)
So, fail once and quit? Sounds like fearful flip flopping to me. ;-)
Seriously: the "free market" needs rules to avoid efficient consumers subsidizing the habits of others. No problem buying the biggest truck you can afford, but don't let my tax money underwrite your purchase, either of the truck or its fuel, while I'm buying a small pickup or sedan.
This is the problem with any resource made artificially cheap: it tends to be consumed competitively. The more you use the greater your advantage, since everyone else's tax money effectively flows to you.
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bioburner 6:45PM (8/20/2007)
If you tax the gasoline everyone is on the same footing. People who "buy too big a truck" will have to pay more.
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Hamster 12:54PM (8/21/2007)
Bioburner,
When they taxed cigarettes at a substantial amount people bought contraband cigarettes in substantial amounts.
This can be easily done with gasoline through NG conversion, ethanol and illegal "hell's angels" gas sales etc.. especially in smaller neighbourhoods where the government is spread-out very thin. This means less money for government. Working with a new car purchase causes less effort for the government than checking up on every liter of gas consumed.
Also, your setup would interfere with the Prius taxi driver while retirees that use their 1980 Econoline once a year would be flying.
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