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Comment by ansgri | Hacker News Reader

I understand the viewpoint that less cars = better cities. But worse cars? Because this heavily penalizes buying better cars. I understand the need to segment the tax burden by income level, but it seems reasonable to make the maximum tax level so that, e.g. you pay flat €50k in taxes if your car costs more than €50k. You can play even the safety card here: more expensive cars have more advanced automation and safety features, so their use should be encouraged.

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> you pay flat €50k in taxes if your car costs more than €50k.

That would be the same as capping income tax: you pay a 20% rate up to $100k of taxes, after that, no incremental taxes.

It's the opposite of progressive, actually taxing rich people less than poor people.

I'd even go and propose that cars over €50k should be taxed at a higher marginal tax rate than lower-priced cars.

There's a difference between taxing income and taxing spending.

They are opposites, so the tax rate should also be opposite - the higher the spending the lower the tax.

After all, you want to encourage wealthy people to spend and spread the wealth, not encourage them to hoard it.

> you want to encourage wealthy people to spend

Not on cars.

Why not? In what way is a cheaper car socially better than an expensive car?

You don't want cars overall to start with.

And as wealth increases, the negative utility of a 1% increase in price of a certain good decreases for that buyer, requiring higher taxes to have the same disincentive than for lower income buyers.

Also, cars (especially luxury ones) are highly unproductive assets.

> You don't want cars overall to start with.

So you punish those who have/want one? Ouch, I wouldn't want to live in your world.

Work the other side, make people want to not have one. Making people's life miserable is not a good way to manage your citizens.

> And as wealth increases ... lower income buyers.

Except that the wealthy person just buys a cheaper car. They still have a car, and you have not accomplished your goal.

Your mistake is you taxed spending, without even checking income.

Your scheme does not make people not get a car, it causes people to get a cheaper car, that's all.

> So you punish those who have/want one? Ouch, I wouldn't want to live in your world.

No. Cars have negative externalities to society, so you tax them to account for those externalities.

This is the same reason why governments subsidize infrastructure and education, as those generate positive externalities to society, and most of the value generated is in those externalities, you need a negative tax on those items to incentivize them.

Or the same reason why governments subsidize electric cars.

> Except that the wealthy person just buys a cheaper car. They still have a car, and you have not accomplished your goal.

Sure, but you're providing the same economic disincentive as you are for a poor person (in relative utility), which is a fairer way to do it.

> Your mistake is you taxed spending, without even checking income.

You don't seem to understand the concept of positive and negative externalities.

I'm not proposing to tax spending, I'm proposing to tax a good so that its price accurately reflects the negative impact on society it causes.

> I'd even go and propose that cars over €50k should be taxed at a higher marginal tax rate than lower-priced cars.

> I'm not proposing to tax spending, I'm proposing to tax a good so that its price accurately reflects the negative impact on society it causes.

It seems like you're proposing taxing based on the price of the good, not the cost of the negative externalities. It would make more sense to tax based on some combination of the car's weight, footprint, engine size, fuel efficiency, and emissions metrics, based on use of the vehicle, as well as at purchase time.

A vehicle that's a luxury item, but otherwise comparable in relevant statistics, doesn't necessarily need to be taxed more heavily than a basic version of the same thing.

> It seems like you're proposing taxing based on the price of the good, not the cost of the negative externalities.

Wrong. I'm proposing that to have the same economic incentive on a luxury version of a certain good you need a higher proportional tax to account for the flattening of personal utility curves.

And that's before we get into the fact that luxury vehicles have even higher negative externalities due to increased engine size, lower fuel efficiency, larger size, etc.

> Wrong

Then I think you're being very unclear in what you're saying. The externalities aren't necessarily related to the price of the vehicle.

Well, to extract welfare funding from rich people you already have income taxes (maybe even progressive), why exactly does one want to encourage a low-quality lifestyle?

Because expensive cars are luxury goods with negative externalities.

Which externalities does an expensive car have that a cheap one doesn't?

Larger size, larger engine, more natural resources required (and more pollution).

Also, not only you need to account for the negative externalities, but you also need to provide a disincentive for purchase, which then needs to be progressive due to the decreasing marginal personal utility.

Those aren't aspects of just luxury cars...and they're aspects that I covered in my previous post.

> but you also need to provide a disincentive for purchase

You need to pay for the externalities. Beyond that, I disagree that you need to disincentivize the purchase.

> more expensive cars have more advenced automation and safety features, so their use should be encouraged

That would indeed be the long term play, but as most democratically elected governments, they have a 4 year window in which they don't want to be known as "The guys that cut away a ton of welfare, so people could get cheaper cars", since the immediate effect would be a loss of money. Unless of course, people started buying more new cars, but that is speculative, and a gamble that not many of the bigger parties seem willing to make :(

Well, compare to the UK. Here we have low taxes on cars and are often incentivised to purchase new ones. This supports car manufacturing, which is a very significant industry for the UK, employing more than 800,000 people. New cars (dieselgate aside) are generally better for the environment too.

But aside from occasional temporary scrapage schemes, there isn't really much incentive to get rid of old ones. This not only results in congested roads but also towns and city streets that are cluttered with parked and often rarely-used vehicles occupying every available space and greatly reducing the "public realm" that could be used for other, healthier and more productive purposes.

So while Denmark's high taxes on new vehicles may not produce the best outcomes for the quality of the vehicle fleet, it does seem to have been effective at reducing the total number of vehicles.

Perhaps, like in Japan, annual registration fees/taxes should start increasing after the vehicle is a certain number of years old, making it expensive to retain ownership of old vehicles.

The tax rate of cars in China is similar, and it results in fewer cars, and more people taking public transit. Note: this is also because there is very advanced public transit that can handle high throughput, and only the super-wealthy buy cars, in part to show off.

I like cars and make quite a decent salary, and I still drive a 17 year old Peugeot with 330k miles simply because I am not willing to pay the tax on the kind of car I actually want.

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