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Gas taxes are falling short thanks to EVs, hybrids. Here's how states can close the gap fairly

By Mark Brodie
Published: Thursday, March 28, 2024 - 11:05am
Updated: Thursday, March 28, 2024 - 11:09am

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The Arizona House late last month defeated a proposal that would have created a $135 annual registration fee for owners of electric vehicles. Arizona and other states have been trying to figure out how to pay for transportation projects like road repairs, when gas tax revenue isn’t necessarily keeping up with the needs.

The Arizona Department of Transportation reports the gas tax brought in nearly $540 million last year; the agency also says there are more than 50,000 electric vehicles on the roads in Arizona. None of those drivers, of course, pays the gas tax, but they do use public roads and put wear and tear on them.

There’ve been efforts in Arizona over the past several years to increase the 18-cent-per-gallon gas tax. Those efforts have gone nowhere at the state Capitol. And Republican lawmakers similarly want voters to preemptively ban a tax on the number of miles driven. Some see that as a way to make sure EV drivers pay their share for transportation needs.

So, what are some ways states could look to equalize this? To help answer that, The Show talked to Kara Kockelman, professor of transportation engineering at the University of Texas at Austin.

Kara Kockelman
Kerri Lohmeier
Kara Kockelman

Full interview

MARK BRODIE: When you look around the country and the number of states that rely on gas taxes to help fund transportation projects and the number of electric and hybrid vehicles out there which use less or no gas, how big is the shortfall between the need and the money coming in?

KARA KOCKELMAN: Oh, the electric vehicles aren't making a dent in that budget difference. It's really the legislators' refusal or I guess inaction on the gas taxes that has really undercut the DOT.

BRODIE: In terms of legislators not being willing or able to, to raise the gas tax.

KOCKELMAN: Right? They feel that the public will punish them at the polls. And Grover Norquist many years ago had, I think all the Republicans sign a no new taxes pledge. So they're stuck in that situation and I think the Republicans, you know, wield that over their, their Democratic partners in this process. And so both are very scared to raise it at this point.

BRODIE: So what are some of the ways states are trying to make up that shortfall in terms of getting enough money to do the kinds of road projects that they need, given the revenues that they have now?

KOCKELMAN: Well, one easy inequity to tackle, you know, because it is a small share of voters is the EV owners, which is, you know, perfectly legitimate. The other way that they raise much more money than they will be able to raise from the, you know, sort of equivalent gas tax placed on EV owners is bonds. And so in Texas and many other states where they have tiny gas taxes that haven't changed in 30 years, they are probably resorting to bonds a great deal.

BRODIE: So, in a state like Texas and I suspect in other states how big of a percentage of the need do gas taxes make up? Like how big is the shortfall?

KOCKELMAN: So I think perhaps close to a third of teat's budget is now coming from those bonds. So the legislators don't want to vote. So they basically ask the voters to vote directly to tax themselves. It would be much easier to tax at the refineries through the gas tax. But they, they, they don't have the courage to do that yet.

BRODIE: So officials in Arizona have, have been talking for a few years now about how EVs are cutting into the amount of revenue they're bringing in. Although they also, as you referenced in other states have not raised the gas tax in, in many, many years. So there've been a lot of different ways to try to think about how to make up some of that difference. And you know, there's a proposal to to have an EV registration fee. There are ideas of maybe taxing based on mileage driven, things like that. I mean, are those the kinds of things that, that other states are looking at as well.

KOCKELMAN: Yes, they've been looking at those possibilities for many years. Not only to raise money for the roads, but also to abate congestion in many settings at certain times of day and at bottleneck locations, for example. So it'd be useful to have some device on board the vehicle that could keep track of its position and what tolls are live at that time of day in that position. 

BRODIE: Well, so the proposal in Arizona was for $135 annual fee for EV owners in the state and that proposal did not get the necessary votes. So I'm wondering if there is sort of a consensus best way to do this like, is there a way to make sure that, you know, drivers who don't use gas but still do use the roads and put wear and tear on the roads are paying their fair share of maintaining them?

KOCKELMAN: Personally, I would love to see a use-based tax and I think an easy way to do that now, thanks to the cellphone technologies and apps that we can use is to simply submit an odometer reading by going, starting at the back of your vehicle and creating a video directly in the app. So it cannot be modified and going from your license plate around the side of the vehicle. So it's clear kind of what make and model it is and using machine learning or computer vision to infer that and then going straight into the dashboard with the front driver's seat door open to read that odometer. It's very difficult to play with odometer readings. In many locations, we do have safety or admissions audits every year.

And so those,, o odometer readings can also be read at that point, but it'll give the state registration agency a sense of the distance as long as the vehicle wasn't destroyed. But even if it were, the police can usually get an odometer reading off of that vehicle after a big crash. And so then your registration fee pivots up or down for the following year or you, you know, you may file for a reimbursement if you pay too much because you really didn't do the kind of driving that the flat registration fee would.

BRODIE: That almost sounds like the way a lot of people estimate their taxes and, you know, pay what they think they're going to owe. And then, you know, when tax time comes, they either pay what they still have left to pay or they get a refund for what they overpaid. 

KOCKELMAN: Right, but the dollar numbers are much smaller here, as you can imagine. It's $135 in Arizona. So a lot of people would just leave that on the table because they would only be able to get reimbursed for maybe $45.

BRODIE: Are there privacy concerns with this? Like I can imagine a lot of people not thinking it's really the government's business, how much or where they're going.

KOCKELMAN: Oh, right. If you don't mind the congestion and the bottlenecks and, and things like that, then absolutely, some people could play, pay a flat fee to just get out of this, and we do see this with the toll tag. Some people are, you know, just can't be bothered to get it tag, which would save them a lot of money if they use those toll roads frequently, but tolls tend to be a pretty small amount of most people's monthly costs unless you live in the vicinity of D.C. or New York City or you're constantly using an expensive bridge in Chicago.

BRODIE: So, going forward, do you think this is going to continue to be a topic of conversation that transportation departments and policymakers are going to have to try to figure out?

KOCKELMAN: It's been a very serious issue for the DOT for many years decades, really. We were using the highway trust fund to pay for other things at the federal level and we owed the trust fund a lot of money. And now the trust fund is in the red because the legislators at both the federal and most of the state levels are not willing to raise that tax. They are so worried about voter pushback.

BRODIE: Yeah. So ultimately, do you think the solutions for this come from the state level in in individual states. Do you think there's a federal solution to be had here?

KOCKELMAN: It would be much easier once. And we're all at the federal level because the negative externalities of this material petroleum are pretty severe. Like the cost of being in the Middle East year after year. So that would add like another dollar per gallon. And then the diesel impacts are so noxious in terms of emissions that adds another dollar on top of the negative cost. So, I would say you'd wanna be taxing at $2 per gallon on gasoline and $3 per gallon on diesel right away. And that would still be much less than we see in Europe and many other places in the world per gallon.

BRODIE: All right. That is Kara Kockelman, professor of Transportation Engineering at the University of Texas at Austin. Kara, thank you very much. I really appreciate it.

KOCKELMAN: It was my pleasure.

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