Saturday, December 31, 2016

Part 3 - Gas Tax 101

This is the third 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.

U.S. road and bridge construction and maintenance are paid for with the Highway Trust Fund (HTF) which is partially funded by federal and state gas taxes. In 2016, the United States federal excise tax on gasoline was 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. On average, as of July 2016, state and local taxes and fees add 29.78 cents to gasoline and 29.81 cents to diesel, for a total US average fuel tax of 48.18 cents per gallon for gas and 54.21 cents per gallon for diesel. These are averages as each state enacts its own gas tax on top of the federal tax. Wikepedia.org In Wisconsin where I pay most of my gas tax, we pay $.24 per gallon for both gasoline and diesel fuel.

As vehicle fuel efficiency increases, as required by the federal Corporate Average Fuel Economy (CAFE) standards, drivers are buying less fuel per mile driven. Tbe CAFE standards are U.S. regulations, first enacted by the United States Congress in 1975, after the 1973-74 Arab Oil Embargo, to improve the average fuel economy of cars and light trucks (trucks, vans and sport utility vehicles) produced for sale in the United States. These regulations helped the economy and (unintentionally) the environment by squeezing more miles per gallon, reducing the need to import oil and reducing carbon added to the atmosphere. Already in the 1970s, each mile driven was adding less tax to the HTF.

Fast forward to the advent of more fuel efficient hybrid and electric vehicles, and states are noticing big deficits in their road-building budgets. Lawmakers and tax collectors saw the obvious problem, electric vehicles (EVs) that don't pay gas tax were to blame. And some states decided they weren't going to idly stand by and put up with these tax evaders.

Right Now, Electric Vehicles are NOT Getting a Free Ride
There are some arguments to be made that EVs are not necessarily getting the free ride people think, even without paying gas tax for miles driven. “While it is true that electric vehicles do not burn gasoline and so do not contribute to the gas tax, electric vehicles generate more in registration fees and sales taxes because of their relatively higher sales prices,” says Ecology Center’s Charles Griffith. “Compared to their non-electric counterparts, electric vehicles contribute more gross revenue and more revenue per mile driven to the state coffers, so saying that electric vehicles get a ‘free ride’ on our highways is simply not true." Ecocenter.org

However, with the advent of the sub-$30,000 Chevrolet Bolt and a Tesla sedan (both releasing in 2017), this is a short-lived argument. So, the real question is, are electric vehicles making a dent in gas tax revenues now? 

In Part 4 I explore how electric vehicles are making a dent in collected gas taxes.

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