Tax Horsepower - Impact On Engine Design and On Auto-industry Development

Impact On Engine Design and On Auto-industry Development

The fiscal benefits of reduced cylinder diameters (bore) in favor of longer cylinders (stroke) may have been a factor in encouraging the proliferation of relatively small six-cylinder-engined models appearing in Europe in the 1930s, as the market began to open up for faster middle-weight models. The system clearly perpetuated side-valve engines in countries where the taxation system encouraged these engine designs, and delayed the adoption of ohv engines because the small cylinder diameter reduced the space available for overhead valves and the lengthy combustion chamber in any case reduced their potential for improving combustion efficiency.

Another effect was to make it very expensive to run cars imported from countries where there was no fiscal incentive to minimise cylinder diameters: this may have limited car imports from the USA to Europe during a period when western governments were employing naked protectionist policies in response to economic depression, and thereby encouraged US auto-makers wishing to exploit the European auto-markets to set up their own dedicated subsidiary plants in the larger European markets.

Taxation can modify incentives and tax horsepower is no exception. Large capacity (displacement) engines are penalized, so engineers working where engine capacity is taxed are encouraged to minimize capacity. This rarely happened in the USA, where license plate fees, even adjusted for horsepower ratings, were comparatively much lower than European car taxes.