The Urbane Farmer

Part 4 - Are Electric Vehicles Making a Dent in Gas Tax revenues NOW?

Part 6 - Some States Experiment With New Ways to Fund Roads

Part 7 - The Truth is, Gas Taxes Don't Actually Paying for Road Construction and Repairs

BONUS - The Electric Vehicle Owner’s Talking Points

Part 7 - The Truth is, Gas Taxes Don't Actually Paying for Road Construciton and Repairs

noreply@blogger.com (Joshua Feyen) — Sat, 31 Dec 2016 18:45:00 +0000

This is the seventh in a eight-part series on gas tax, roadbuilding and electric vehicles. You can find links to the other parts at the bottom of this post.

Of all the reading and research I did for this series, what I found most interesting is that gas taxes don’t actually cover all the cost to build and maintain roads and highways. Gasoline taxes account for $31.1 billion or about 87 percent of the Highway Trust Fund (HTF). Since the interstate system was implemented in 1947, U.S. spending on highways has exceeded the amount collected from fuel and vehicle fees by more than $600 billion. Where does the rest of that money come from?

Most of the deficit is made up with local, state or regional bonds or municipal property taxes. So even if a person doesn’t drive, if they pay state or federal taxes, they’re paying for road construction and maintenance, a type of infrastructure that only cars, trucks and buses can use.

However, there is a legitimate argument to be made that regardless of vehicle ownership and gas purchases, we all benefit from roads for public transportation, commercial product transportation, civic use such as ambulances, police and fire vehicles. Roads within cities are generally financed through local, property, and sales taxes - not the gas tax.

In sum, taxes levied on fuel to pay for roads don’t fully cover their costs. Actually, they don’t even begin to cover the costs of ALL the roads in the build environment. So electric cars not paying the small amount that purchasing fuel contributes to road maintenance is a bit of a non-issue. Not saying they shouldn't, it's just not what's breaking the Highway Trust Fund bank. Truth is, federal, state and local governments, and thus tax paying society as a whole is subsidizing roads big time. cleantechnica.com

A recent study attempted to identify how electric vehicles (EVs) would affect the HTF using industry and government reports that detail fuel tax revenues and through analysis of EV sales from 2010 to 2015. Results for electric vehicle market penetration have shown increasing sales, but EVs have resulted in very little impact on gas tax revenues. As of August 2015, the lost gas tax revenue from EV sales of 365,000 vehicles is shown to be $71.9 million or a loss of 0.23 percent. That's two tenths of a penny out of a dollar. Current assessment is that in 15 to 25 years EVs could make a significant impact on overall revenue.

However, long before the advent of electric vehicles, the HTF has long experienced a continuing shortfall that is attributed to three major factors; more fuel efficient internal combustion engine (ICE) vehicles, the fact that federal gas rates has not risen since 1993 and the increased cost in highway construction and repairs. fsec.ucf.edu

Green cars, making up only 3.3 percent of all vehicles sold last year according to WardsAuto, are not creating much of this shortfall. Any special EV taxes or fees states collect in the near term will probably only fill in a few potholes literally. Washington State anticipates bringing in just $127,900 from its new annual $100 tax on drivers who don’t fuel up at the pump. “There are not enough electric vehicles on the road to make a material difference to significantly reduce the revenue to the transportation funds,” says Lloyd Levine, a consultant for the Sacramento Electric Vehicle Association, who drives a Chevy Volt. bloomberg.com

Part 8 concludes this series with a summary and a final perspective on the importance of roads to civil society - there's even a reference to the Roman Empire!

Part 1- Introducing the Tricky Question of Electric Vehicles Paying Their Fair Share

Part 2 - Changing Trends Include Far More Than Electric Vehicles

Part 4 - Are Electric Vehicles Making a Dent in Gas Tax revenues NOW?

Part 6 - Some States Experiment With New Ways to Fund Roads

Part 7 - The Truth is, Gas Taxes Don't Actually Paying for Road Construction and Repairs

BONUS - The Electric Vehicle Owner’s Talking Points

Part 6 - Some States Experiment With New Ways to Fund Roads

noreply@blogger.com (Joshua Feyen) — Sat, 31 Dec 2016 18:45:00 +0000

This is the sixth in a eight-part series on gas tax, roadbuilding and electric vehicles. You can find links to the other parts at the bottom of this post.

In 2013, Oregon lead the way with a voluntary “usage tax” program. Using either a GPS-device (kind of creepy) or odometer readings, 5,000 owners of any car that gets more than 55 miles per gallon are charged a flat annual fee of $542.50, or a usage fee of 1.55 cents per mile. Gas tax paid at the pump is refunded by the state to avoid double taxation. I like this because it's a program that doesn't discriminate between electric vehicles and efficient conventional ones, and comes closer to charging for actual use of roads and bridges.

There are several benefits to this payment scheme. Primarily, people pay for the miles actually driven regardless of the type of vehicle (electric or conventional fuel). I also think that there could be an additional benefit to this type of charging in arrears because if drivers actually see the tax on a per mile basis, they might be encouraged to drive less. This is a behavior that would benefit everyone; fewer miles equals less road wear and tear, less pollution (formed by combustion engines or electric power plant emissions), less noise pollution and less road congestion. It could also encourage healthier behaviors such as biking, walking, carpooling or trip consolidation. It could also improve quality of life by encouraging less time in cars and more time at home. The Oregon program became operational by July 2015. http://motherboard.vice.com/read/what-replaces-the-gas-tax-once-electric-cars-replace-gas

In terms of tracking mileage as is being done in Oregon, some people are not going to like the GPS option. I think a pure odometer reporting mechanism would be a better, more private option. However, since the tax situation is state-based, perhaps the GPS option is necessary to only charge the additional tax for miles driving within the state, or to prevent double paying when using toll-roads. There is also a problem with buying fuel outside the state and where taxes should be paid or refunded.

Here is an example of the benefits of seeing a tax in action to change behavior. A Dutch study showed that information, feedback and suggestion can change behavior. An experiment was done with 5,000 participants divided into three groups; group A) received information about their energy consumption, B) received information and feedback about consumption, and C) information, feedback and suggestions for further reduction. "The results suggest that feedback through web applications does indeed increase perceived consumer awareness and reduces electricity consumption. Experimental groups scored an average much lower in terms of energy savings compared to the control group. Customers were also satisfied with what they had learned from participating in the experiment, implying that their awareness of electricity consumption had increased," (Hemmes, Papyrakis and Beukering) consiliencejournal.org

In Massachusettes, one proposed source of supplemental income is from charging owners of electric vehicles an additional registration fee. The proposed bill was pushed by Representative Bradley H. Jones (R-North Reading), who called the issue “really one of equity,” making sure that everyone who uses the roads is pitching in. While Jones' bill, which called for an annual $100 registration fee for all-electric vehicles, fizzled in Massachusetts state legislature, other states already have such programs in place. The problem I see with an EV registration fee is that it does not take into account the actual miles driven. If an electric vehicle due to it's inherently limited range can't drive $100 worth of road tax, this becomes a regressive tax that's also "unfair."

I think there is one final consideration to take into account when figuring out a new road tax scheme. For non-commercial vehicles, weight and size are not currently measured or taken into account for road tax with the exception and assumption that they will use more fuel. My thought is that a Smart Car is two or three times shorter than a club cab truck, and is many times lighter. Because it literally occupies less space on the road, and applies far less weight to the road, should it not pay less tax than a large, heavy vehicle? To make my point, (and I know this is absurd, but work with me) if we ONLY drove 11-foot long smart cars, would it be possible that we'd need fewer lanes, shorter highway on and off ramps, less street parking, etc? Again, the point is only to show that yes, we'd need less road infrastructure. I think those vehicles that take up more space and exert more damaging weight on roads should also pay their fair share.

In Part 7 I disassemble the Highway Trust Fund and see that it isn't suffering because of electric vehicles. It's got much bigger problems.

Part 5 - Actual Impact of Electric Vehicles

noreply@blogger.com (Joshua Feyen) — Sat, 31 Dec 2016 18:45:00 +0000

This is the fifth in a eight-part series on gas tax, roadbuilding and electric vehicles. You can find links to the other parts at the bottom of this post.

While plug-in hybrids and full electric vehicles (EVs) have gained considerable momentum since the Chevrolet Volt and Nissan Leaf arrived in 2011, they’re still a minuscule fraction of the nation’s fleet. Through November, 2015, these cars accounted for just 0.6 percent of all U.S. light-duty vehicle sales. Hybrids vehicle sales (those that burn fuel) account for 2.2 percent of overall vehicle sales, and have yet to hit four percent in a given year. This indicates that the problem of gas tax revenue lost through these zero fuel burning or very efficient vehicles is negligible compared to the decrease in tax collection that has resulted from the nation’s drastic drop in overall fuel consumption. caranddriver.com

The following table shows overall revenue from gas vs. electric vehicles.

builtbymichigan.org

The average U.S. gas tax is about 48.7 cents per gallon; this is an average, state-to-state actual rates vary dramatically. The Wisconsin gas tax is 32.9 cents per gallon, with 2 cents of the tax targeted for cleaning up leaking underground storage tanks. At the average 13,476 miles U.S. citizens drive in a year, assuming 20 miles per gallon, using the U.S. gas tax average, the driver pays $328 annually in gas tax.

If they drive fuel efficient cars, their overall fuel tax paid obviously goes down. For example, at the current theoretical average of 25 miles per gallon, the average person pays about $263. If they drive a car that manages 30 miles per gallon, they are down to $218. According to the logic of electric car detractors, fuel efficient cars are getting an unfair ride, too. This is yet another reason to explore alternate ways of funding the Highway Trust Fund. cleantechnica.com

Part 6 explores some options being explored at the state level.

Part 1- Introducing the Tricky Question of Electric Vehicles Paying Their Fair Share

Part 2 - Changing Trends Include Far More Than Electric Vehicles

Part 4 - Are Electric Vehicles Making a Dent in Gas Tax revenues NOW?

Part 6 - Some States Experiment With New Ways to Fund Roads

Part 7 - The Truth is, Gas Taxes Don't Actually Paying for Road Construction and Repairs

BONUS - The Electric Vehicle Owner’s Talking Points

Part 4 - Are Electric Vehicles Making a Dent in Gas Tax Revenues NOW?

noreply@blogger.com (Joshua Feyen) — Sat, 31 Dec 2016 18:44:00 +0000

This is the fourth in a eight-part series on gas tax, roadbuilding and electric vehicles. You can find links to the other parts at the bottom of this post.

The "electric vehicles are expensive and paying a lot of sales tax" argument may be true, but it won't be for long. Both Chevrolet and Tesla are coming out with pure electric vehicles that will be under $30,000. And used electric vehicles have terrible resale value because new models are taking such huge leaps in technical ability. This means that you can pick up a used electric vehicle very reasonably.

Another problem with blaming EVs for the Highway Trust Fund budget deficit is their sheer numbers on the road. There simply aren't enough of them to single-handedly cause a significant or even a small problem.

“There are not enough electric vehicles on the road to make a material difference to significantly reduce the revenue to the transportation funds,” says Lloyd Levine, a consultant for the Sacramento Electric Vehicle Association. Hybrids, plug-in hybrids, and electric cars may collectively account for about three percent of car sales in any given month. That is to say, electric vehicles comprise a very small share of the vehicles on the road, and will not likely comprise a significant proportion of the vehicle pool for a decade or more.

I'm not saying that EVs should continue not paying for their contribution to road maintenance and building. I'm simply saying that the current problems are not, and can not be attributed solely to EVs. From what I can see, the more immediate issue is that conventional cars are becoming more fuel efficient. In 2012, the Obama administration released new Corporate Average Fuel Economy (CAFE) standards, requiring automakers to raise the average fuel efficiency of new cars and trucks to 54.5 miles per gallon by 2025. The current CAFE standard for small vehicles (cars) is 30 mpg.

Other unintended consequences of imposing special taxes on EVs could end up costing vehicle manufactruring states like Michigan in the long run. I think the last thing we want to do is dampen sales of a product that has a lot of potential to generate jobs for workers and new economic opportunities for auto and advanced-battery manufacturers. And as I pointed out earlier, at the moment EVs generally have a higher price tag, adding additional sales tax to state coffers.

In reality, while electric vehicle sales have been rising, they are still a very small part of the market, so imposing a new tax on them wouldn’t raise nearly enough money to overcome the shortfall states are facing from declining gas-tax revenues. Those revenues have been declining for a number of reasons including greater fuel economy in traditional vehicles and changing driving habits leading to fewer miles driven overall. This means that NOW is the right time to figure out how to tax vehicles appropriately for their use, wear and tear on roads and not to single out electric vehicles with special taxes or fees. ecocenter.org

In Part 5, I examine the actual tax impact of electric vehicles.

Part 1- Introducing the Tricky Question of Electric Vehicles Paying Their Fair Share

Part 2 - Changing Trends Include Far More Than Electric Vehicles

Part 4 - Are Electric Vehicles Making a Dent in Gas Tax revenues NOW?

Part 6 - Some States Experiment With New Ways to Fund Roads

Part 7 - The Truth is, Gas Taxes Don't Actually Paying for Road Construction and Repairs