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U.S. roads and bridges are in abysmal shape — and that was before the recent winter storms made things even worse.
In fact, the government rates over one-quarter of all urban interstates as in fair or poor condition. One-third of U.S. bridges need repair.
To fix the potholes and crumbling roads, federal, state, and local governments rely on fuel taxes, which raise more than $80 billion a year and pay for around three-quarters of what the U.S. spends on building new roads and maintaining them.
I recently purchased an electric car, the Tesla Model 3. While swerving down a particularly rutted highway in New York, the economist in me began to wonder, what will happen to the roads as fewer and fewer cars run on gasoline? Who will pay to fix the streets?
Fuel taxes 101
Every time you go to the pump, each gallon of fuel you purchase puts money into a variety of pockets.
About half goes to the drillers that extract oil from the earth. Just under a quarter pays the refineries to turn crude into gasoline. And around 6 percent goes to distributors.
The rest, or typically about 20 percent of every gallon of gas, goes to various governments to maintain and enhance the U.S. transportation’s infrastructure.
Currently, the federal government charges 18.4 cents per gallon of gasoline, which provides 85% to 90% of the Highway Trust Fund that finances most federal spending on highways and mass transit.
State and local governments charge their own taxes that vary widely. Combined with the national levy, fuel taxes range from over 70 cents per gallon in high-tax states like California and Pennsylvania to just over 30 cents in states like Alaska and Arizona. The difference is a key reason the price of gasoline changes so dramatically when you cross state lines.
While people often complain when their fuel prices go up, the real burden of gasoline taxes has been falling for decades. The federal government’s 18.4 cent tax, for example, was set way back in 1993. The tax would have to be 73% higher, or 32 cents, to have the same purchasing power.
On top of that, today’s vehicles get better mileage, which means fewer gallons of gas and less money collected in taxes.
And electric vehicles, of course, don’t need gasoline, so their drivers don’t pay a dime in fuel taxes.
A crisis in the making
At the moment, this doesn’t present a crisis because electric vehicles represent only a small proportion of the U.S. fleet.
Slightly more than 1 million plug-in vehicles have been sold since 2012, when the first mass market models hit the roads. While impressive, that figure is just a fraction of the over 250 million vehicles currently registered and legally drivable on U.S. highways.
But sales of electric cars are growing rapidly, as the distance they can travel before recharging climbs and prices fall. Dealers sold a record 360,000 electric vehicles last year, up 80% from 2017.
If sales continue at this breakneck pace, electric cars will become mainstream in no time. In addition, governments in Europe and China are actively steering consumers away from fossil fuels and toward their electric counterparts.
In other words, the time will come very soon when the U.S. and individual states will no longer be able to rely on fuel taxes to mend American roads.
What states are doing about it
Some states are already anticipating this eventuality and are crafting solutions.
One involves charging owners of electric cars a fixed fee. So far, 17 states have done just that, with annual taxes ranging from $100 to $200 per car.
There are a few of problems with a fixed fee approach. For example, the proceeds only go to state coffers, even though the driver also uses out-of-state roads and national highways.
Another is that the fee is regressive. Since a fixed fee hits all owners equally, regardless of income or how much they drive, it hurts poorer consumers most. During debate in Maine over a proposed $250 annual EV fee, opponents noted that the average person currently pays just a third of that – $82 – in state fuel taxes.
Oregon is testing another solution. Instead of paying fuel taxes, drivers are able to volunteer for a program that lets them pay based on miles driven rather than how many gallons they consume. The state installs tracking devices in their cars — whether electric or conventional –and drivers get a refund for the gas tax they pay at the pump.
The program raises privacy and fairness concerns, especially for rural residents who have few other transportation options.
Another way forward
I believe there’s another solution.
Currently, carmakers and others are deploying large networks of charging stations throughout the country. Examples include Tesla’s Superchargers, Chargepoint, EVgo and Volkswagen’s proposed mobile chargers.
They operate just like gas pumps, only they provide kilowatt-hours of electricity instead of gallons of fuel. While electric vehicle owners are free to use their own power outlets, anyone traveling long distances has to use these stations. And because charging at home is a hassle — requiring eight to 20 hours — I believe that most drivers will increasingly choose the convenience and speed of the charging stations, which can fill up an EV in as little as 30 minutes.
So one option could be for governments to tack on their taxes to the bill, charging a few extra cents per kilowatt-hour “pumped into the tank.” Furthermore, I would argue that the tax — whether on fuel or power — shouldn’t be a fixed amount but a percentage, which makes it less likely to be eroded by inflation over time.
It is in everyone’s interest to ensure there are funds to maintain the nation’s roads. A small percentage tax on EV charging stations will help maintain U.S. roads without hurting electric vehicles’ chances of becoming a mass market product.
Jay L. Zagorsky is a senior lecturer at Boston University. This post originally appeared at The Conversation and is republished here under a Creative Commons license.
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23 Comments
Such a tax is fine - if they first correct the tax situation with fossil fuels. Ie, stop subsidizing it and charge for the environmental damage it does.
My exact thoughts. Thank you for keeping me from scrolling down the comment list looking for this comment.
It's not "in everyone's interest to ensure there are funds to maintain the nation's roads"; it is, however, in some people's interest.
First step is to remove the federal monstrosity from anything having to do with roadways, roadway infrastructure, roadway maintenance, and roadway R&D. Next step is to correct the tax and subsidy situation with fossils, as the gentleman above notes.
Returning roadway responsibility to municipality, county, and state level representatives - as it was prior to the Great (and Ongoing) War - will deliver results for municipalities, counties, and states. Perhaps returning much roadway responsibility to "private" enterprises whilst maintaining a "right to roam" as in Scotland is worthy of consideration, as well.
Here in the Hudson Valley, the brickworks would restart when the massive global-level subsidies for fossil drilling and waste end; then, "climate friendly" infrastructure would return. Today it's all buried under the petroleum and Portland-cement concrete in cities and towns. As well, rail would return to the fore... which triggers discussion of zoning and land use, which will need to be reprioritized as well.
Great icebreaker here!
Being that there's no such thing as a right to privacy when you're not on your own property I don't see why tax based upon miles driven isn't the least intrusive way to go. Those who drive less pay less for road maintenance.
John,
That's just factually wrong. Your right to privacy is highest in your own home, but you have a diminished but unextinguished right to privacy in all sorts of other more public contexts.
Let me be more specific, it's not necessarily a natural right. For example when in public, you're probably photographed numerous times via surveillance cameras without your consent. There's no law saying that a private citizen can't follow you around town in public and observe/record your behavior. Most laws regarding audio recordings in public only require that one party of the conversation is aware of the recording (typically that's the person doing the recording).
The most logical tax would be one related to usage. Usage is a function of not just mileage but also gross vehicle weight....given that as a vehicles weight increases the usage/damage to the roadway goes up.
So semi-trucks would continue to pay the most and big trucks/suv would also just like they do now due to low mileage on their vehicles causing them to buy more gas pay more gas tax.
I agree that EV drivers should pay their fair share of road taxes. Here in Colorado, the EV fee is a flat $50 per year. Co-workers and I did calculations comparing a Prius to our Leafs, and concluded that for the commuting that we do, $50/year for the Leaf is slightly more than we would pay driving a Prius. Of course, this would be different for every vehicle/driver, given that the EV fee is not dependent on mileage. Also, the article makes a very good point that the federal government is not getting any of this fee -- and they should, so long as they are contributing to the cost of building and maintaining roads.
Of course, a Prius gets very good gas mileage, so this may or may not be an apt comparison. However, I would also point out that the wear and tear on the roads by the current crop of EV's is likely significantly less than other larger vehicles. I suppose, as time goes on, we will see EV pickups and even semi's... so maybe in the long term, EV's will contribute a greater share of impact on the infrastructure.
I'm fine with a mileage-based EV fee, but that should be achievable without tracking my location, which is what Oregon is apparently doing. It's already illegal to mess with one's odometer, and doing so is getting harder anyway as vehicle systems are mostly computerized. Cars could electronically/securely report the mileage to the state, or in the near term, EV's could be required to stop annually by a state emissions test center simply to record the mileage. We could even go so far as to use in-vehicle GPS to track the mileage on a per-state basis, which reveals only a very coarse location, and is more in-line with how we pay gas taxes today.
I absolutely do not agree that EV drivers will mostly charge away from home. For over 10 years, my commute was 30 miles a day, round trip, which I think is pretty typical (averages are widely published). At 3.5 to 4 miles per kWh (which I easily achieve with the Leaf), there is no problem putting enough charge for that commute back into the vehicle overnight -- even from just a standard 120V outlet. Why would I stop and waste 10-20 minutes fast charging when I can simply plug in when I get home, and unplug when I leave in the morning? Not to mention that the fast-charge networks charge 3x-5x per kWh as compared to what I pay at home for electricity? With an L2 charger at home (which is what I actually have), I could easily put 200 miles worth of driving distance back into my car each night, if my EV battery has enough capacity to absorb that much.
I've seen believable figures indicating that 99% of all road wear is caused by non-cars. So arguably cars should only be taxed for 1% of road maintenance - not worth bothering with, make it 0% (as it often is with electric cars). Unfortunately, truckers unduly influence politicians.
Well in the end it doesn't really matter because the cost is ultimately borne by the consumer in the price for goods/services.
It does still matter, because not everyone drives the same amount, nor do they consume the same things.
Actually, it doesn't really matter because the cost is ultimately borne by the taxpayer in the form of government subsidies and the citizen in the form of collateral for sovereign bonds: Consumers pay very little relative to the actual cost of production.
Well maybe if we stop supporting spending trillions of dollars for wars for oil and greed we would all have flying cars by now.
LOL. The common person already has difficulty navigating a 2D world, there's no reason to believe they could manage 3D.
In Maine, we register our cars annually. When we register, we have to report the mileage. It's pretty simple to assess a fee based on the yearly mileage. When we register, we pay an excise tax. The mileage fee could be added to that.
We also need to ELIMINATE the Montana LLC state tax dodge. It's basically fraud and theft when people living in other states, get their vehicles registered in Montana. They buy a brand new vehicle and live 2,000 miles away from Montana. They avoided paying this states taxes of almost $4,000 when they bought the vehicle. They put Montana plates on it and drive it in this state. They then avoid paying the yearly plate renewal which would be around $500 for a new vehicle. It's stealing, lying and fraud. Tax dodging but they get away with it until the update the laws on the Montana vehicle registration plate tax dodge.
They drive this vehicle, use the roads in this state, but pay ZERO vehicle taxes. It's a scam. "Render unto Caesar what is Caesar's." That was what the Bible and Jesus said. Pay your taxes. Not find ways to cheat, lie and fraud your way out of paying taxes.
The same thing is being discussed here in Australia. The preferred option seems to be road user charging, using widely available technology for tracking annual kilometres (with the simplest being a self-declaration by the driver). The obvious problems present themselves, such as rural people driving many more kilometres than people in inner cities. On the whole, though, I think it's a workable solution and could be phased in slowly as fuel tax collection declines.
The problem has been exacerbated by not increasing the gasoline tax to match inflation for the past 30 years. It is somewhat refreshing that there is concern about losing revenue because 4% of the cars in California and less than 1% in other states are creating road-repair deficit. This means that people expect EVs will dominate our roads in the future.
P.S. Statistics show that the vast majority of EV charging is done at the residence (>70% , if I remember correctly). Hopefully, this changes in the future, meaning that those folks who don't have a garage also find it economical to purchase an EV.
I think the solution is very simple. Keep increasing the gas tax, and charge nothing to those that don't use gas.
This would further incentivize people to transition to using less gas, as this is the cause of many related issues (pollution, oil spills, climate change, oil wars, etc.).
When the taxes are so high that there are too few gasoline vehicles left on the road consuming gasoline, then we can begin transitioning to taxing electric cars on a "per-ton" mile driven to cover infrastructure expense.
Currently, peopling burning fossil fuels are spoiled, and used to paying FAR below what they should be for the damage they are causing... it's about time we start taxing the gas they burn, and giving free use to the roads to those that make better choices... until the times comes that the gas just can't be taxed any higher to cover the costs of road infrastructure.
Jeff,
That would do nothing to the rich but it would devastate the middle class and poor people. Taxing the poor and middle class hurts them and does nothing to the rich. Taxing people to change their behaviors only effects the poor. The rich don't give a crud about paying a higher gas guzzler tax. The mom driving to work, trying to support a family, is the one who will get hurt.
Consider that currently, the gas tax is charged equally to all, so nothing would change on that front.
A viable solution to your concern would be to offer an income tax credit to people that earn under a certain wage, funded by the gas tax. And the tax would be increased on a slow curve... to allow ALL people to adjust to it.
I think how we tax EVs is a bit of a moot point. They’ll figure it out and it probably still won’t be enough to maintain the roads, because our society will do anything to avoid the real costs of automotive dependency. The real question that the bright shiny EVs avoid altogether is whether Americans travel miles every day because they want to or because they have to. I think it is increasingly the later. We’ve spent the last several decades avoiding the real costs of cars by neglecting the infrastructure they depend on and the environment they damage, while simultaneously wrapping our lives around them.
https://www.npr.org/2019/04/05/710364158/report-finds-more-than-47-000-structurally-deficient-bridges-in-the-u-s
Food, clothing, shelter, …transit? In my neck of the woods, cars are very real part of the affordable housing equation. It’s not the gas tax but the fact that the owning and operating a car altogether is almost unavoidable at present and directly completes with paying for housing. It would be great if the move to EVs could be used to also facilitate some kind of move away from needing the travel so much on a daily basis. Unfortunately, along with driver-less cars, they seem like another step in our blind love affair with the automobile.
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