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Notches — where small changes in behavior lead to large changes in a tax or subsidy — figure prominently in many policies, but have been rarely examined by economists. In this paper, we analyze a class of notches associated with policies in the United States and Canada aimed at improving vehicle fuel economy. We provide several pieces of evidence showing that automakers respond to notches in fuel economy policy by precisely manipulating fuel economy ratings so as to just qualify for more favorable treatment. We then describe the welfare consequences of this behavior, derive a welfare summary statistic applicable to many contexts, and draw lessons for corrective taxation in the presence of notches. Finally, we use a comparison of the amount of strategic manipulation that occurs surrounding tax notches to the amount surrounding presentation notches in fuel economy label rules as a way of estimating consumer willingness to pay for fuel economy. ∗The author’s would like to thank David Good, Robert Mull, and seminar participants at the University of Michigan for helpful comments