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What Replaces the Gas Tax Once Electric Cars Replace Gas?

States are wondering how they'll pay for roads for electric cars.
Image: Wikimedia Commons

As we move to replace gasoline, the states are looking at how they're going to replace revenue collected via the gas tax. They're caught in a balancing act, between penalizing people driving electric vehicles and maintaining their roads and bridges.

You can be forgiven for thinking that cars becoming more fuel-efficient, or even all-electric was one of those unqualified goods, but ending a paradigm is going to entail some growing pains. You may be ecstatic at the idea of the air getting cleaner as oil companies and petrostates lose revenue, but even the most militant anti-car evangelist recognizes that we're going to need roads, even if all the cars run on sunshine and are driving themselves.

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Maintenance on roads and bridges is paid for, in part, through the gas tax. More than 90 percent of gross federal Highway Trust Fund receipts and 40 percent of all state revenues for highways comes from revenue collected at the pump. According to inflation-adjusted data from the Institute on Taxation and Economic Policy, gas tax revenue nationwide dropped from $40.7 billion in 2004 to $37.9 billion in 2010.

The question of gas revenue in a gas-free world, though, is still mostly an academic one, but as an article in Sunday's Boston Globe illustrated, Massachusetts is just one state that's looking at the next phase in road revenue, as electric vehicles, hybrids, and conventional vehicles get more miles per gallon, or miles without gallons entirely.

“We are going to continue to rely on the gas tax for quite a while to maintain the safety of our roads and bridges,” Kristina Egan, the director of the coalition Transportation for Massachusetts, told the Globe. “But it is really important for us to start exploring sources to supplement the gas tax as cars become more fuel-efficient.”

One source of supplemental income was going to come from charging owners of electric vehicles an additional registration fee. The proposed bill was pushed by Representative Bradley H. Jones, who called the issue “really one of equity,” making sure that everyone who uses the roads is pitching in. While Jones's bill, which called for an annual $100 registration fee for all-electric vehicles, fizzled in Massachusetts state legislature, other states already have such programs in place.

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Colorado instituted a $50 registration fee for driving electric, alternative-fuel and high-efficiency vehicles this year. In North Carolina, the state Division of Motor Vehicles began collecting a $100 fee. Washington State is expecting $127,900 from its $100 annual tax this year, which doesn't sound like much, because it still isn't. Green cars only made up 3.3 percent of all vehicles sold in 2012, and while the number is rising, it still isn't huge.

“There are not enough electric vehicles on the road to make a material difference to significantly reduce the revenue to the transportation funds,” Lloyd Levine, a consultant for the Sacramento Electric Vehicle Association, told Businessweek. The more immediate issue is that conventional cars are becoming more efficient.

Which is one reason that fees aimed squarely at electric vehicles, such as the Massachusetts fee, get such a tepid reception, the other being that the government is still incentivising people to buy more fuel-efficient cars.

It's a tech-induced problem that is leading to tech-based solutions. Oregon is leading the way with a voluntary “usage tax” program. Using either a GPS-device (kind of creepy) or odometer readings (normal), 5,000 drivers will be charged 1.5 cents per mile traveled starting next year. Any gas tax they pay can be refunded by the state. It's a program that doesn't discriminate between electric vehicles and efficient conventional ones. The program is set to become operational by July 2015. As the Globe outlined, if it works in Oregon, state officials and residents could warm to the idea of applying it elsewhere.

It might seem far off, but states will be better off trying to figure out how to pay for upkeep on infrastructure in new ways, rather than figuring out how to pay for infrastructure that's literally under water. Given how late the switch off of fossil fuels is coming, states might be finding themselves trying to do both before long. Maybe we shouldn't give up on flying cars just yet.