Monday, July 18, 2022

Road Taxes: A Drag on Electric Cars


As you probably know, most states rely on a tax on every gallon of gasoline sold for on-road use to pay for a good fraction of the expensive job of maintaining roads, bridges, and other transportation infrastructure.  The fraction varies from state to state, but a 2019 Consumer Reports study showed that about 28% of highway funding came from fuel taxes on average, 22% from registration fees, and the rest from a variety of sources such as tolls and bond funding.


I don't know when it occurred to me to wonder what will happen to this source of money when most of the cars on the road use electricity instead of gas, but probably not before it occurred to the state legislators, who have mostly decided to pursue a single remedy for this looming problem:  an annual fee specially assessed on every electric vehicle (EV). 


My own state of Texas has proposed charging up to $200 per car, and other states either plan to implement such a fee or already have done so.  While an annual fee is simple to administer, it loses a virtue that the gasoline tax had.  Under the old system, if you drove more, or drove a bigger vehicle, you paid more.


Beyond that, the same Consumer Reports study showed that the vast majority of proposed or existing EV fees were unfairly high, penalizing EV drivers compared to people who drive old-fashioned internal-combustion-engine (ICE) vehicles. 


The way the analysts figured this out was to calculate something they called a "maximum justifiable fee" for each state, which took into account the average vehicle miles traveled, the prevailing fuel economy standard, and the state's fuel tax rate.  This calculation essentially determined the average fuel tax drivers paid in that state, and assuming EV owners drive about as much as ICE owners, it's not fair to charge the EV owners more than the maximum justifiable fee.


Well, guess again.  Of the 28 states the report studied which had either a proposed or existing fee for EVs, only 8 wound up charging EV owners less than the maximum justifiable fee in a projected 2025 case study.  All the rest charged more, and three proposed fees (those in Missouri, Arizona, and Texas) that were more than twice the maximum justifiable amount. 


As of today, Texas is still mulling over the proposed fee, so at this point, all the EV drivers in Texas are freeloading on the gas-tax-paying majority.  But the legislatures won't let this go on indefinitely, and it's not clear how the situation will be resolved.


The federal government has recently muddied the waters further by making hundreds of millions of dollars available for EV infrastructure, mainly more charging stations.  While EV owners will be grateful for this boon, it throws a big monkey wrench in the economics of charging EVs, which is already skewed by such things as Tesla Motors' offer of free charging for the lifetime of some of its cars, although that policy appears to be fading into the sunset.


Nobody pays Exxon or Valero to build a new gas station, so if we're looking at fairness in the energy-supply area, the fossil-fuel people could call foul in the case of federally-subsidized charging stations.  So that makes the picture even more complicated.  If you own an electric vehicle, you may have received free electricity to charge it in the past, you may drive up to a government-subsidized charging station now or in the future, but you may get socked with an annual fee that makes you pay more for road maintenance than your ICE-driving friends.


The ethics of paying for public-use infrastructure such as roads, gas stations, and charging stations gets political pretty quickly.  But we can think of some extremes that almost everybody would say are wrong, regardless of their political persuasion.


It would not be fair, for example, to let EV drivers totally off the hook with regard to road maintenance, and simply increase the gasoline tax on those few retrograde ICE-driving troglodytes who insist on warming up the planet, until they simply quit in disgust—or bankruptcy.  I say it wouldn't be fair, but I can imagine that this squeeze-'em-dry solution might appeal to certain progressive sectors who would like to see all fossil fuel use cease tomorrow. 


On the other hand, if we make fairness the paramount issue, it would seem that those who use the roads more ought to pay more.  And those whose vehicles are harder on the highways should pay more than people who drive Mini Coopers or motorcycles.  Most new vehicles are equipped with wireless Internet connectivity, electronic odometers, and GPS sensors that can easily be made to calculate how many miles have been traveled and on what kinds of roads.  The technology exists to come up with some kind of road-use fee schedule that would truly proportion one's taxation to the actual amount of use one made of various state and city roads. 


From a libertarian point of view, this approach would have the virtue of extreme fairness.  The gas tax never was more than a rough-and-ready attempt to do this kind of proportioning at a time when more exact methods were unavailable.  Under this scheme, if you drove a certain weight of car on a certain road, you would pay the same amount whether it used electricity or gasoline.


The problem with this idea would be its unpredictability.  In effect, every road would now be a toll road, and the more you drove, the more you'd pay.  But if the maximum justifiable fee is less than $100 on average, most drivers might not even notice it, especially if it was paid once a year along with the registration fee.  Somebody would have to pay for the software, but software is cheap once it's written.


I don't know how this is all going to turn out, but fairness seems to have been neglected up to now, and I hope justice prevails, or at least gets a word in edgewise.


Sources:  The 2019 Consumer Reports analysis is available at  The information on Tesla's free-electricity offer is available at 

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