Call it the cost of efficiency. Most states have boosted gas taxes or tied them to inflation to recoup billions of dollars in highway fund revenue lost over the past decade to fuel-efficient, hybrid and electric automobiles.
Nobody likes higher taxes.
“State transportation trust funds are in trouble when you have vehicles that use less gas or no gas, but most legislative leaders know gas taxes are not a very popular thing to increase,” said Douglas Shinkle, transportation program director of the nonpartisan National Conference of State Legislatures. “So a lot of states are pivoting to vehicle user fees, even though a few states are still raising gas taxes.”
As cars become more fuel-efficient and electric vehicles multiply, how should states generate revenue to build, repair and maintain roads?
Industry watchers are divided on the issue. EV advocates call for even higher gasoline taxes, while skeptics seek increased EV fees. Others propose replacing per-gallon taxes with fees based on mileage for all types of vehicles.
“The vast majority of road funding tax revenue shortfalls in recent years are directly related to inflation and the fact that the federal government has not raised gas taxes in over 30 years,” said Chris Harto, senior energy policy analyst at Consumer Reports. “Many states have also not raised gas taxes in a long time.”
The U.S. Energy Information Administration reported in January that state gas taxes averaged 32.44 cents per gallon, while the federal gas tax has been fixed at 18.4 cents since 1993.
Consumer Reports estimates that existing and proposed EV taxes will raise just 0.3% of state highway funding next year if EV ownership swells to 11% of the new vehicle market, as expected. The advocacy group has argued that EV fees force owners to pay more than drivers of gas-powered cars in most states.
Conservatives contend that raising gas taxes forces the drivers of gas-powered cars to subsidize the Biden administration’s push for EVs, which they blame for adding to highway repair costs.
“Transportation departments are in a bind because EVs are much heavier than gas-powered vehicles and do far more damage to roads and bridges,” said Bonner R. Cohen, a senior fellow at the National Center for Public Policy Research.
The Biden administration has allocated billions of dollars to finance EV production and charging stations as part of a climate-friendly push to reduce the nation’s reliance on fossil fuels.
Some libertarians support taxing all vehicles per mile as a more equitable way to collect revenue for state transportation funds.
In Virginia, which raised its gas tax to 26.2 cents per gallon last year, lawmakers enacted a Highway Use Fee and Mileage Choice program in 2020. It allows owners of fuel-efficient and electric cars who drive less than 11,600 miles per year to pay less than those who drive more.
“To address this problem more efficiently, policymakers should be looking to replace per gallon excise taxes with per mile charges,” said Marc Scribner, a senior transportation policy analyst at the Reason Foundation. “Fuel taxes … worked fine when powertrains across the fleet were very similar, but developing a propulsion-neutral mileage-based user fee should be the priority over the next decade.”
A Reason Foundation study estimates that state gas tax revenue will fall 30% to 50% by 2050, depending on EV sales.
Fuel taxes made up 38.4% of state transportation budgets in 2022, down from 41.1% in 2018, according to the National Association of State Budget Officers. Projections show states will lose up to $87 billion by 2050 as more drivers go green and emerging car models use less gasoline.
Meanwhile, 33 states and the District of Columbia have enacted fixed gas tax increases or indexed rates to surging road construction costs since 2013, the National Conference of State Legislatures said. Seven states — California, Virginia, Colorado, Missouri, New Jersey, Minnesota and Utah — have made those changes since COVID-19 broke out in 2020.
The National Conference of State Legislatures said most states have capped how high gas taxes can increase with inflation.
Mr. Shinkle blamed the revenue declines largely on improved fuel efficiency in conventional and hybrid cars but predicted that the growing share of EV owners would start making a greater impact.
“EVs are absolutely reducing gas tax revenues,” said Adam Hoffer, director of excise tax policy at the Tax Foundation. “States where EVs have the highest market share [are] where the biggest impact will be.”
Joe Trotter of the American Legislative Exchange Council, a network of conservative state lawmakers and investors, said EVs increase road wear by as much as 40% because they are heavier than conventional autos.
“When you add this to the bill taxpayers already pay for subsidizing the purchase of these vehicles as well as the infrastructure upgrades to charge these vehicles, taxpayers are on the hook for a market ballooned by government spending at every level,” said Mr. Trotter, director of the council’s task force on energy, environment and agriculture.
• Sean Salai can be reached at ssalai@washingtontimes.com.
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