Saturday, December 31, 2016

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

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.

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 3 - Gas Tax 101  
  • Part 4 - Are Electric Vehicles Making a Dent in Gas Tax revenues NOW?
  • Part 5 - Actual Impact of Electric Vehicles
  • 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
  • Part 8 - Conclusion
  • BONUS - The Electric Vehicle Owner’s Talking Points