Should drivers of ICE vehicles pay road taxes that drivers of EVs avoid?
By Patrick Anderson
Patrick Anderson
Should drivers of ICE vehicles pay road taxes that drivers of EVs avoid?
Starting July 1, drivers in #Iowa charging their #EVs at commercial chargers will be paying a tax on #electricity, in a manner similar to what a hundred million drivers of gas-powered vehicles do when they refuel. Gasoline and diesel #taxes are the main source of funding for America's roads, and right now drivers of electric vehicles largely avoid paying them. That is changing.
Iowa says users of "electric fuel" need to pay tax, just like users of other fuels. In a few days, it will start levying an excise tax of two and six-tenths cents for each kilowatt hour ($0.026 per kWh):
https://lnkd.in/gNeFq92p
This is a nationwide problem, and the Anderson Economic Group, LLC study for the County Road Association of Michigan earlier this year quantified it for one state. Although electric cars are usually heavier and therefore put more wear-and-tear on the roads, EV drivers don't pay federal or state gas taxes. The share of EVs on the road today is small--very small in most parts of the country. However, that share is growing fast, and causing a shortfall in funding for roads.
The AEG study takes into account the fact that #Michigan, like over half the states, charges a special EV registration tax that partially compensates for the loss of state gas taxes. It also considers the registration tax, which is partially based on the price of the vehicle when new and therefore picks up additional tax from higher-priced EVs. However, no tax compensates for the loss of federal gas taxes, and the price of the vehicle has very little to do with the wear-and-tear that comes from driving a car or truck on the road. In addition, there is a question of fairness: should drivers of ICE vehicles pay road taxes that drivers of EVs avoid?
The excise taxes on gasoline and diesel fuels has long been a stable source of revenue for the repair and maintenance of roads, and arguably the fairest tax in terms of imposing costs on those that use the related service. However, the advent of EVs is forcing states to adapt. See the AEG study for a solid analysis of how the funding gap is likely to grow in one big state, and contact us if you need a similar rigorous analysis for your state.
#tax #states #fiscal #fiscalpolicy #statebudgets #transportation #automobile #automotiveindustry #economics #cars #gas #construction
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