Should EVs *ever* pay the federal "road" tax?

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mbender

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Using conservative guesses and calculations, here's what I come up with:

For each 1% of the passenger/light-duty fleet that transitions to electric,

  • roughly $3.5 billion per year stays in the U.S. [economy] rather than going overseas for petroleum, and
  • roughly $50 million per year is saved on the interest not due on the increase to the national debt because that money remained in the U.S.

I suspect that the sum of those two things (plus intangible benefits) makes up for the roughly $150 million that would have been paid as the federal gasoline tax*.

Numbers/assumptions used above:

  • $1 billion / day sent overseas for petroleum for entire passenger vehicle fleet.
  • 1-2% average interest rate on the national debt.
  • $15 billion revenue per year from the federal fuel tax/surcharge (for light-duty vehicles, out of $25 total).

I'd be happy to be corrected, but surely this issue will need to be addressed some time, regardless of the exact numbers. (Hopefully the 1% used above will be reached soon: even though EVs currently constitute only about 0.1% of U.S. passenger vehicles, our numbers are growing exponentially!)


* "Gas tax" is a bit misleading imo, since it is actually much more of a surcharge than a tax (because it's a fixed amount). Had it been a percent (of sales price) when it was last changed 20+ years ago, can you imagine difference in revenue that it would have brought in? It might have also accelerated the transition to electric more than is already the case, given that price-at-the-pump would be that much higher. All topics for another post, though.
 
Seeing as taxation is extortion, and the burden of this extortion has been shifted through political bribery from big oil (due to massive subsidies) to John Q Public (via wars and gas tax), my answer would be no. I would rather tackle the root issue than try to tinker with the murky social benefits in relation to a totally screwed up tax system. But that doesn't help this discussion much. :)

In a simple world, electric cars and gas cars of the same weight would pay the same use fee (or toll), since they are responsible for roughly the same wear on the road surface. The difference would come from the thousands of private property owners that wouldn't be suing you for spewing carcinogenic waste onto their property and into their lungs, and the savings gathered from not having millions of angry Muslims trying to kill you because your rulers decided it would be a good idea to drop bombs on their kids in order to secure strategic oil reserves for inevitable future bombings of children when the oil addicted world suddenly realizes production can no longer keep up with demand.

But in the context of this screwed up system we live in, you could certainly argue that the value of the social benefits of electric cars FAR exceeds the profits that politicians see from road taxes- whether we are talking foreign interventionism, pollution effects on the environment, pollution effects on our health, and benefits stemming from the logistical view of having a more efficient locally sourced fuel product rather than going overseas, which brings us back to foreign interventionism....
 
Assuming that the road tax continues to be a primary means of paying for road infrastructure, and that EVs largely replace ICEs, it's inevitable that EVs will have to pay. The only question is how soon.

In the very near term, EVs are going to continue to be subsidized by the federal government, visible to consumers in the form of tax credits. For now, allowing EVs to avoid paying road taxes is a very reasonable "perk" consistent with the intent of the other EV subsidies. Due to the relatively small number of EVs on our roads, not collecting road taxes on EVs won't make much difference.

In the medium term, there will be no direct subsidies for EVs, but it will continue to be in the public interest to encourage drivers to switch to electricity (for the reasons highlighted by the OP and others). I think it's quite reasonable to keep EVs exempt from road taxes at least until they represent maybe a few percent of US vehicles. For a precedent, consider hybrid vehicles. At least in California, HOV privileges for hybrids continued for years after the subsidies ran out. Consistent with LEED guidelines, many commercial properties still offer preferential parking for "fuel efficient and hybrid" vehicles.

At the same time, I'm in favor of raising the federal gasoline tax aka. road tax at least in step with inflation. Eventually, when bringing EVs into the tax fold, it would make sense to de-couple fuel taxes from road taxes. Grid electricity is already taxed, and there's no need to tax individuals who generate their own renewable electricity. Non-renewable fuels should be taxed commensurate with their effect on national security and our shared environment. Road taxes could be based on vehicle type/weight and miles driven.
 
I have no problem paying my fair share for road tax as a multiple EV driver. I'd like to see it based on mileage driven, but realize that may be difficult or cumbersome to implement across the masses...

If you want quality roads, they have to be built and maintained...As mpg of the gasoline fleet goes up (the primary way the road taxes are currently collected), and EVs spin off from that, the amount of revenue will continue to go down...
 
The mileage-based tax idea may seem like a good idea in theory but in practice the implementation problems are massive, both in terms of cost-to-administer and in terms of unfairness. By comparison a per-gallon or per-dollar gas tax is almost ideal.

"Unfairness"? Yes. Consider that not every car-mile causes an equal amount of wear-and-tear on the road. Some of the wear-and-tear is due to weight, yes, but even that is not linear with miles driven. There are studies of city highways that prohibited trucks (Lake Shore Drive in Chicago being an obvious example) and found that trucks caused wear-and-tear far in disproportion to what you'd expect simply by adding the weight of all trucks being driven. In addition, cars and trucks driven at higher speeds or in rougher manners tend to create more wear-and-tear. While it's hard to measure just how much wear-and-tear each car creates, the gas tax is a pretty good approximation.

Then consider that in the US gas taxes are mostly from states and locales - just a small portion from the feds. This means that if Sally in Connecticut drives 15,000 miles a year, and 7,500 of that is on her annual trip to California, then if she pays a mileage tax to Connecticut the other states where she drives half her miles get nothing. Of course, with a gas tax she pays wherever she fills up. There is some approximation here ("hey, I didn't need to fill up in Kansas once!") but across the whole population it tends to average out.

Finally, when you have a complicated system like mileage-based tax collection some people will figure out how to cheat it. Selling their car just before re-registering it in another state or similar. And yes, you can design systems to be smart to catch those cheats, but that just adds to the administrative overhead.

The only problem this runs into is that EVs don't pay any gas tax. Oh I know the politicians in places like Utah are also upset that hybrids pay less gas tax, but the net difference for hybrids is so small that it's not worth worrying about (unless you have a second political agenda, as these politicians do).

In the short term this is so small as to be a non-problem - it's been brought up only by anti-EV forces. In the medium term a solution like Colorado's - a small annual fee of $50 of which 40% goes to EV charging infrastructure - makes sense as it is easy to administer using existing infrastructure and difference in mileage for existing small EVs really makes very little difference over all.

In the long term if EVs become the dominant type of vehicle other solutions will be needed. It's probably good to think about those now - but there is no need to implement them today.
 
mbender said:
[*] roughly $50 million per year is saved on the interest not due on the increase to the national debt because that money remained in the U.S.[/list].
Click to expand...
Foreign exchange does not add to the national debt.

Otherwise I am Ok paying a road tax and feel it should be much lower than gasoline vehicles. EPA could add a pollution tax to gasoline to keep it balanced. Could put a pollution tax on electricity also accounting for the type of fuel. Gasoline tax could be increased at both Federal and State levels.

JMHO
 
cgaydos said:
The mileage-based tax idea may seem like a good idea in theory but in practice the implementation problems are massive, both in terms of cost-to-administer and in terms of unfairness. By comparison a per-gallon or per-dollar gas tax is almost ideal.

"Unfairness"? Yes. Consider that not every car-mile causes an equal amount of wear-and-tear on the road. Some of the wear-and-tear is due to weight, yes, but even that is not linear with miles driven. There are studies of city highways that prohibited trucks (Lake Shore Drive in Chicago being an obvious example) and found that trucks caused wear-and-tear far in disproportion to what you'd expect simply by adding the weight of all trucks being driven. In addition, cars and trucks driven at higher speeds or in rougher manners tend to create more wear-and-tear. While it's hard to measure just how much wear-and-tear each car creates, the gas tax is a pretty good approximation.

Then consider that in the US gas taxes are mostly from states and locales - just a small portion from the feds. This means that if Sally in Connecticut drives 15,000 miles a year, and 7,500 of that is on her annual trip to California, then if she pays a mileage tax to Connecticut the other states where she drives half her miles get nothing. Of course, with a gas tax she pays wherever she fills up. There is some approximation here ("hey, I didn't need to fill up in Kansas once!") but across the whole population it tends to average out.

Finally, when you have a complicated system like mileage-based tax collection some people will figure out how to cheat it. Selling their car just before re-registering it in another state or similar. And yes, you can design systems to be smart to catch those cheats, but that just adds to the administrative overhead.

The only problem this runs into is that EVs don't pay any gas tax. Oh I know the politicians in places like Utah are also upset that hybrids pay less gas tax, but the net difference for hybrids is so small that it's not worth worrying about (unless you have a second political agenda, as these politicians do).

In the short term this is so small as to be a non-problem - it's been brought up only by anti-EV forces. In the medium term a solution like Colorado's - a small annual fee of $50 of which 40% goes to EV charging infrastructure - makes sense as it is easy to administer using existing infrastructure and difference in mileage for existing small EVs really makes very little difference over all.

In the long term if EVs become the dominant type of vehicle other solutions will be needed. It's probably good to think about those now - but there is no need to implement them today.
Click to expand...

Lots of good points. I think per-mile is most equitable from the motorist's point of view but it does raise the issues of distribution, cheating, and administration. A flat fee applied to all vehicles might be the way to go. Or better yet why don't we ditch the idea of roads being supported by a use tax, and simply fund them out of general revenues? Everyone benefits from the road system whether they drive 4000 miles, 40000 miles or none at all.
 
Nubo said:
... Or better yet why don't we ditch the idea of roads being supported by a use tax, and simply fund them out of general revenues? Everyone benefits from the road system whether they drive 4000 miles, 40000 miles or none at all.
Click to expand...
Sorry, that's much too sensible and straightforward to ever get implemented!

While considering sensible but politically impossible alternatives, what we need is a carbon tax. The revenue from transportation fuels and, perhaps, some from electricity generating, could be used for roads. As renewables take over from fossil fuel electricity generation the taxes would decline and we could revisit some other sort of road tax for EVs, although a mileage based tax would be an administrative nightmare, as others have said. But Nubo's suggestion to just fund roads from general revenues is simpler and more sensible.
 
Everyone who drives on the road needs to pay for them. We should all be willing to pay. The ALT fuel tag in GA costs $35 extra for road tax, it seems like a bargain. The increase in overall fuel economy is good news, but it is reducing highway fund revenues. They need to be restructured, but heaven forbid that anyone agree to a modest increase in taxes (adjusting it back to where it started) for a good cause. EVs aren't a halo that absolves us of all responsibility.
 
dgpcolorado said:
Nubo said:
... Or better yet why don't we ditch the idea of roads being supported by a use tax, and simply fund them out of general revenues? Everyone benefits from the road system whether they drive 4000 miles, 40000 miles or none at all.
Click to expand...
Sorry, that's much too sensible and straightforward to ever get implemented!

While considering sensible but politically impossible alternatives, what we need is a carbon tax. The revenue from transportation fuels and, perhaps, some from electricity generating, could be used for roads. As renewables take over from fossil fuel electricity generation the taxes would decline and we could revisit some other sort of road tax for EVs, although a mileage based tax would be an administrative nightmare, as others have said. But Nubo's suggestion to just fund roads from general revenues is simpler and more sensible.
Click to expand...

A flat tax or taking it from other revenue (i.e. raise income tax?) is not likely to bode well on the "fairness" test. IF we assume the tax is for road maintenance it makes sense to charge based on usage. A simple way would be to have a mile/weight calculation - i.e. you pay so much for every lb of your gross weight multiplied by miles traveled. Road "wear and tear" is a function of weight and use after all. I don't see it as being an administrative nightmare - annual inspection of odometer and factory label of gross weight should be good enough. Yes, I know some miles are on private roads, but can you really say this is a material difference between all drivers? If you don't travel on public roads, don't register your car.

I'm happy to pay a fair tax based on use here to cover cost of build/maintenance. Carbon taxes etc are intended to change behaviors - keep those separate and use revenue for general fund if you like. I don't buy into the "those who spew CO2 should pay for my roads" philosophy. Behavior modification taxes have their place, but keep the infrastructure funded based on factors/behaviors that affect the cost of maintenance, not unrelated issues (in my opinion of course).
 
Slow1 said:
...taking it from other revenue (i.e. raise income tax?) is not likely to bode well on the "fairness" test...
Click to expand...
I disagree. As Nubo correctly pointed out, we all benefit from the roads network, whether we drive a car or not. Using general revenues is more efficient than a user tax and it is less regressive if the revenues come from income taxes, which are somewhat progressive, albeit laced with loopholes.

The reason we have gas taxes for roads is that it is an easier "sell": people who drive more/buy more gas pay more tax. User taxes are fairly simple to explain, but they aren't very efficient and they are somewhat regressive.

While I wouldn't mind a higher gas tax/carbon tax to offset some of the external costs of fossil fuels to society — pollution, wars for oil, etc. — as well as to offset the subsidies that oil production receives, having road construction and maintenance depend on it seems unnecessary. The purpose of such a tax would be to discourage fossil fuel use and encourage the use of alternatives. It could be added to the general fund or — even better — be rebated to citizens on a per capita basis*. Build roads and other infrastructure for their economic benefits and pay for them with general revenue, without the shell game of a separate highway gas tax fund.


* The economics of a per capita rebate are interesting: People who don't drive a fossil fuel car would see a net benefit. People who drive a lot would see a net cost. But the incentive of higher fuel prices would remain and would help to discourage fossil fuel use in favor of alternatives because the rebate each citizen would receive would be independent of use. It is a subtle but powerful use of the free market pricing system. For example: suppose a $2/gallon gas tax. All revenue would be rebated to every man, woman, and child (via the income tax system) as an even share of the total revenue. The amount one gets is completely independent of the amount one drives. The system is "revenue neutral" but provides a powerful disincentive for gasoline use and an incentive for more fuel efficient cars.
 
Well, I suppose everyone has a different idea of "fair" and we could debate that longer than anyone wants to read. My opinion is that taxes intended to maintain infrastructure should be paid by those who benefit from it the most. Now, one can say that I benefit from roads even if I don't drive on them due to products/goods being delivered via these routes. My counter-argument is that the use taxes would then be added to the cost of those goods/services thereby providing an incentive for me to consume less of them and thus reduce my portion of the road maintenance (and perhaps reduce demand on the same). My bias then perhaps is more toward a consumption based tax for things related to the consumption. Income taxes have their place as well, but my idea of "fair" includes consumers paying their own way.

I do, however, like your idea for the carbon tax/rebate pattern. This same thing could be applied to just about any behavior one wanted to change (smoking, trans-fats, etc). IF one accepts that the place of government is to push these behaviors that tax would certainly be a good way to do it.
 

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