no way for a free ride
September 30, 2020 6:08 PM   Subscribe

I got into a rambling discussion the other day with a friend. He is all set to get a fully electric car soon, probably a Tesla. He was excited about the prospect of not buying gasoline and paying the taxes.

Then I pointed out the federal and state taxes on a gallon of gas go a long way towards building and maintaining roads and bridges etc. So, if all vehicles were magically electric tomorrow, how would roads be built and maintained? I haven't run across anyone who really knows.
posted by jtexman1 to Travel & Transportation (17 answers total) 1 user marked this as a favorite
In Illinois the vehicle registration is now significantly more expensive for electric vehicles than traditional, to offset the lack of tax revenue. This seems like it could scale pretty easily.
posted by obfuscation at 6:11 PM on September 30, 2020 [3 favorites]

Of course nobody knows - it’s a political decision so will be hammered out repeatedly. California is already dealing with it.

Note that one of the responses is that counter-incentivizing air pollution from gas vehicles is worth a lot of money itself. Gas doesn’t pay for all it’s externalities either.
posted by clew at 6:14 PM on September 30, 2020 [12 favorites]

To be honest, even gas taxes don't cover a very large share of the costs of road building and maintenance. I think they would continue to be subsidized by all of us through our overall taxes, including those of us who don't drive.
posted by ferret branca at 6:21 PM on September 30, 2020 [13 favorites]

Echoing that gas tax doesn't go a long way toward paying for this in many places, and that how the rest of it is paid for varies a lot according to jurisdiction.
posted by aspersioncast at 6:31 PM on September 30, 2020

Because of improving gas mileage, to say nothing of electric vehicles, there has been a push in some states to switch to a miles-traveled tax to address the very issue you raise.
posted by DrGail at 6:51 PM on September 30, 2020 [12 favorites]

This is a very broad question. I assume the point of this is to allocate the cost to the party benefiting from the roads?

First thing to consider is that damage to roads is not linear with weight, it's more like exponential or worse. A single B-Double truck causes damage equal to 20,000 family cars. Who benefits from trucks? Every single person who has ever bought something that has arrived via our roads, which is virtually 100% of all items purchased. Ultimately taxes are just a way of raising revenue, there's no 1:1 correspondence between who benefits and who pays, the government wants to raise money in the least politically costly way possible.

I've only looked at the current cost structure for Australia but am assuming it's largely similar to the US. In 2017 the Australian federal government took in $11 billion for petrol and diesel taxes (net of rebates) while a total of $26 billion (estimated) was spent on road construction. Only Federal road funding ($8 billion) is called out in the Federal budget, while the majority of road building activity is undertaken by local council and states out of different revenues buckets so it's very difficult to estimate.

So it's not just fuel taxes. For example, when I buy a new block of land, part of the "cost" of buying the block is paying the developer to build the roads in the first place. Maintaining local roads comes out of local council fees / property taxes.

But yes the transition to personal battery electric vehicles will result in a shortfall of about $800 per year per vehicle, so this has to be replaced by increasing taxes somewhere in the system. One option is a tiered surcharge on electricity consumption (higher tax on usage above 25kWh per day) or simply increased vehicle registration charges. If we transition to Transport as a Service then the government will just charge the TaaS providers a fee for use, much easier than trying to figure out an equitable method of taxing individual users.
posted by xdvesper at 7:11 PM on September 30, 2020 [7 favorites]

Hot take: cars are subsiding trucks anyway, so the real issue is making companies pay for wear and tear on roads
posted by raccoon409 at 7:13 PM on September 30, 2020 [4 favorites]

Best answer: It makes more sense to think of this in two ways: how should you distribute tax to discourage or reward; and, independently, how much money do you need to pay all the bills?

If gas tax starts to make less money because fewer people use it, we would balance it out by juggling other taxes so that we had enough money in total to pay the bills. That would not necessarily involve taxing electric vehicles as a substitute. Maybe we would bump one of the income tax brackets by a cent, or fiddle with the thresholds.

That's still, overall, a net good, because the tax did its job and stopped you doing the bad thing of burning gas and making pollution, and started you doing something better. But that good doesn't necessarily come with a cost saving so, yes, there will likely be another tax somewhere that goes up.

So it isn't about the money that the one individual tax makes when considered alone; it is more about putting the financial burdens somewhere where it helps.

(Also worth considering when it's budget time. When someone says 'we will cut gas taxes and put money in your pocket' they either mean '...and we will tax something else instead' or '...and we will spend less money'. They could have cut another tax if they had money to spare, rather than one that indirectly protects the environment.)
posted by How much is that froggie in the window at 7:31 PM on September 30, 2020 [3 favorites]

Many states, especially red ones, started charging EVs extra tax years ago. Unfortunately, they are charging far more than is fair.

In Georgia, people have run the numbers over and over, and electric vehicle (EV) owners are paying more than DOUBLE what would be fair. An average gas car owner pays about $75 per year in gas taxes -- yet EVs in Georgia are assessed a $200+ penalty per year. Further, that money doesn't even go to road maintanence, rather it goes to the "general fund".

OF COURSE electric car owners would be happy to pay their share, but clearly this is political opportunism. Every year, we get that $200+ line item on our registration renewal, and the knife twists.

But wait, it gets better! The one perk that EVs do get in Georgia is free single-occupant access to the HOV / HOT lanes (we have them all over metro Atlanta). But gas car owners (mostly trucks and SUVs actually) have figured out a loophole where they can get the EV plate and enjoy that perk for themselves.

What they do is get a vehicle that could in theory run on E85 (google it). E85 vehicles USED TO qualify for the HOV lane perk, even though you can't easily buy E85 in Georgia and it's not a corn state. Evenutally the Georgia Legislature removed E85 from the list of approved alternative fuels in the 2015 Transportation Funding Act. BUT the Georgia Department of Revenue subsequently ignored that and issued a ruling that it's still OK. Counties are following that ruling and continue to issue the AFV tag to E85 vehicles if the owner pays the $200-ish alternative fuel vehicle fee.

In other words, this is not only another case of political muscle (someone behind the scenes quietly getting the DOR to bend the rules) but a case of the executive branch flat out ignoring the legislative branch. Deep state, indeed. Why are conservatives not (literally) up in arms over this? Hmm?
posted by intermod at 8:45 PM on September 30, 2020 [2 favorites]

Hot take: cars are subsiding trucks anyway, so the real issue is making companies pay for wear and tear on roads

That would require knowing how many miles the vehicle has driven, and most red states don't have any mechanism for reading that, because they don't have inspections. And the good ole boys generally ain't gonna allow more gubmint intrusion into their lives.
posted by intermod at 8:49 PM on September 30, 2020

The benefits of us collectively having roads pays for roads. Let's sidestep this daft "money-contributed" misunderstanding of state infrastructure. Revenue has to happen, sure, but there's a full lifetime of the infrastructure for it to enable other transactions which can fund its creation and upkeep.

Your mistake is to fail to think collectively.
posted by k3ninho at 11:34 PM on September 30, 2020 [1 favorite]

Best answer: First thing to consider is that damage to roads is not linear with weight, it's more like exponential or worse. A single B-Double truck causes damage equal to 20,000 family cars.

Road damage is proportional to the 4th power of axle weight!

There's a few different things here:

-How much incremental damage do various different vehicles do to road infrastructure?
-How much incremental damage is being done to our collective welfare through CO2 and other emissions by different vehicles?
-What is the incremental contribution to future road expansion through congestion of different vehicles? (requires not just road miles but also time of use since people who drive at 4AM do not contribute to congestion)

-What is an efficient way of structuring funding between fuel taxes, vehicle registration costs, payments for mileage, and general taxation? You'd want to consider:
--Polluter/user pays is usually good because it provides an incentive for efficient behaviour
--Socialisation of costs that we all benefit from
--Equity / redistribution and making sure that costs don't fall disproportionately on those not able to bear them
--Collection efficiency / issues with bordering jurisdictions with different rules
--Stimulating certain purchases for the long term public good (i.e. giving people an incentive to by early stage technology lets manufacturing scale up and gets costs down for all of us earlier
--Political acceptability (realistically the most important)

A technocrats dream might be:
-all vehicles to pay towards road maintenance based on miles drive and pressure at the tire/road interface (actually you'd want to calibrate it to driving style since it's specifically heavy braking that causes the damage)
-Time of use prices to pay towards future road expansion based on contribution to congestion
-A carbon tax to pay for emissions of CO2e
-Another tax to pay for particulate, NOX, and other local contamination

In the absence of all the data to do that (and the lack of political will) what you end up with a simplified system that tries to capture some of those things. We do charge heavy vehicles more, we don't charge based on time of use and locational elements but we do charge for total road use through fuel taxes.

So, if all vehicles were magically electric tomorrow, how would roads be built and maintained? I haven't run across anyone who really knows

Up to now, essentially all vehicles have been diesel or electric so between a weight based registration fee and the fact that heavy vehicles use more fuel, everyone has had to pay but proportionately, heavy trucks have been getting away with paying less than their share. Whether higher charges would ultimately fall on the drivers and owners of trucks or on the users of trucking services depends on elasticities - my guess is it would drive the size of trucks down since very large trucks would only be competitive if you absolutely needed one and smaller vehicles would carry things like packages between depots.

EVs get special treatment under this system to reflect some of the benefits they bring both locally and more widely.

Ultimately, the charging regime will have to shift by increasing the share of road funding that comes from registration fees, other charges, and general taxation as the share that comes from fuel comes down. We're seeing the same thing in the charging for electricity - a traditional charging arrangement that has worked for a long time, temporarily modified in an ad-hoc way to incentivise desirable behaviour, and then ultimately moving to a fair, cost reflective basis that works long-term.
posted by atrazine at 3:53 AM on October 1, 2020 [1 favorite]

So, if all vehicles were magically electric tomorrow, how would roads be built and maintained? I haven't run across anyone who really knows

As with many of the low carbon technologies what policy aims to do is to stimulate the innovation process by driving demand. Different policies are more appropriate for doing this, dependent on where you are in the technology maturation process. Once you get to the stage where you have working kit and can industrialise it then you basically need to provide incentives for people to buy it. The demand this creates then incentivises manufacturers to scale up and to innovate further, both of which drive down costs. The incentives to do this can be carrot or stick but the upshot is to impact prices so the number of people willing to buy the tech goes up and the cost keeps going down.

When the tech gets to the point where the new tech beats the old tech without help then you don't need the incentives any more. The Government can then get rid of its stimulus policies (be they subsidies for the new tech, or higher taxes for the old tech/lower for the new tech) and move to tax the new norm to maintain their tax base.
posted by biffa at 4:49 AM on October 1, 2020

Federal gas tax revenue actually does go a huge way toward federal transportation funding. Specifically the highway trust fund (which has required subsidy from general revenues of late because the actual amount of the gas tax is not indexed in any way), not only pays for highways but also a portion of mass transit, bike/ped infrastructure grants, etc. The loss of gas tax revenue at the federal level as cars get more efficient, people switch to electric, and hopefully people just drive individual cars less is a HUGE deal that needs to be figured out by Congress.

The prediction I hear most often is VMT, or Vehicle Miles Travelled. But there are issues of equity (people forced by low income to live further away from employment centers and/or not near transit nodes) and privacy (how does the gov't get the VMT to calculate the tax.)

My company just hosted a policy conference last week, and the general feeling is that Congress is going to continue to kick this revenue question down the road until they are so constrained by drop in gas tax revenue that they have no choice but to address it. The legislation for federal surface transportation spending (the FAST Act), which had a five-year term, was supposed to expire yesterday, but the House and Senate passed resolutions to extend it one year.
posted by misskaz at 7:01 AM on October 1, 2020

Yeah it's worth noting that there's the technical policy issues which guide how one might design a theoretically efficient system and then there's the reality that the government of the United States is currently unable to make any decisions and just keeps doing the same thing over and over again because there's just enough political unity to pass continuing resolutions and maintain the status quo but not enough to make difficult trade-offs and carry out new policy.
posted by atrazine at 7:24 AM on October 1, 2020 [1 favorite]

Response by poster: There is obviously a lot to unpack with this issue. I remember when I started driving in the 70s that the registration of a car was based on the weight of the vehicle. The heavier the car, the more the registration cost. Then along came the oil embargo and cars got lighter. States started losing revenue so they changed it to the age of the vehicle. Newer cars cost more to register. This was in Texas, I don't know what other states may have done.
posted by jtexman1 at 7:37 AM on October 1, 2020 [1 favorite]

it's specifically heavy braking that causes the damage

Taxes on brake pads would be proportional to weight, use, dangerous and damaging driving style - but we really don’t want to deincentivize keeping your brakes good.

This isn’t an EV-specific problem. It’s vexed hard to balance the distribution of benefit and damage and cost of roads, locally and nationally. Great Britain’s various attempts to do so from medieval to industrial times is a lot of the substance of the Webb’s English Local Government - local taxes? Local labor? National taxes? Mercantile incentives? Tax horseshoes, wagon wheels? Mandate wheel material? It all comes round.
posted by clew at 10:10 AM on October 1, 2020 [1 favorite]

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