DRIVE+: Promoting Cleaner and More Fuel Efficient Motor Vehicles through a Self-Financing System of State Sales Tax Incentives

Abstract

DRIVE + (Demand-based Reductions in Vehicle Emissions PLUS Improvements in Fuel Economy) is a proposal to create self-financing tax incentives in California for consumers to buy cleaner and more fuel-efficient cars and trucks. Sales tax surcharges on vehicles with higher emissions of criteria pollutants and carbon dioxide (CO2) would pay for sales tax reductions on more efficient and lower-emitting cars and trucks. The magnitude of the incentives would be pegged to the costs of alternative strategies to control pollutant and CO2 emissions. The proposed incentives would help vehicle manufacturers meet sales goals contained in existing and proposed federal and state emissions and fuel economy standards. DRIVE+ would also encourage manufacturers to market and consumers to purchase vehicles that are cleaner and more efficient than the standards require. DRIVE+ holds the promise of being politically feasible as it imposes no net new taxes and requires no new appropriations from the state general fund.