Saturday, December 31, 2016

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

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.

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.

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.

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 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 

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    2. Unfortunately, the money generated by gas taxes has not kept pace with growing infrastructure expenses and general inflation rates. Simultaneously, the development of electric vehicles and automobiles with higher fuel economy has reduced gas consumption while draining government finances.