Danny Newton

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

What about the tax consequences? More efficient cars have in the past encouraged driving., I don't think that is going to happen now because of the Baby Boom Demographic getting out of their cars and not going to work as after as in the past.

Better gas mileage will mean less money for state highway departments and less gas tax money means that this will put the pressure on for more gas taxes. The Federal Highway Trust Fund has been bailed out three times recently if you count stimulus money going to states. The current bailout is not settled yet because there is a difference in the House and Senate version. This money is required to pay states back for work they already did so there is a lot of pressure to at least give back the money that they borrowed from the Highway Trust Fund in this time of need.

In my state, a vehicle getting 12 miles to the gallon netted 1.533 cents per vehicle mile federal and 1.78 cents per mile state taxes. If the new car gets 20 miles per gallon, the state will get 1.07 cents per vehicle mile for the state and .92 cents per mile for the feds. It looks like the total difference between the clunker and the new car could be 1.32 cents per vehicle mile. The average two years ago was 2.5 cents per vehicle mile from all transportation taxes, state and federal. If all cars dropped overnight this much it would be a disaster. It takes about 20 years to totally turn over a fleet of non-truck vehicles. All this cash for clunkers thing is doing is accelerating the inevitable anyway, unless you foresee people trying to perpetuate their transportation forever, like in Cuba.

Cynical and paranoid people think that all of those orange barrels are just there to slow the traffic down so you can burn more gas to offset the losses to the Highway Trust Fund from CAFE standards.